Tax Saving Tips You Need to Know

Tax time is a dreaded time for most people, but you can use the tax saving tips below to reduce your tax burden, save money, and make tax season a reason to celebrate.

Tip One: Deduct Your Vacation Expenses

While not everyone will be able to justify that weekend in Paris, a professional translator would certainly be able to justify the trip as a business related expense for maintaining language skills. Many trips can be tax deductible. Meet with potential clients, hold a couple of conferences, have lunch with a client while you're there and you can write off a portion of your travel expenses to reduce your tax burden.

Tip Two: Take Advantage of Tax Credits

Tax credits are different from deductions because they directly reduce the amount of tax you owe. Some tax credits are refundable, meaning if you reduce your tax burden by more than you owe, the government will refund you the difference. The child tax credit is a refundable tax credit, so if you owe $500 in taxes and can take a $2000 tax credit, the IRS would send you $1500. There are several credits available that can help you, including credits for first time home buyers and homes and businesses that make earth-friendly changes.

Tip Three: Invest in Your Retirement

Whether you work for yourself or someone else, the IRS encourages saving for your retirement. Up to a certain portion of your income, every dollar that you put into an IRA or 401(k) is tax free, meaning you don't pay taxes on the money at all unless you withdraw it early. You can literally shift yourself into a lower tax bracket by tucking money away for your retirement.

Tip Four: Buy Universal Life Insurance

The money you spend purchasing a universal life insurance policy, both the premium and any additional amount that you invest, are tax deductible. You do not have to pay tax on the money invested in the policy, and if you allow the policy to remain in effect until a death benefit is paid, no taxes are ever paid on the money.

Tip Five: Take Advantage of Your Company's Cafeteria Plan

A Cafeteria plan is an account you set up that takes money out of each pay check before taxes are taken. The money can be used for approved medical and day care costs. The significance of this plan is that the money is available to you during the year untaxed, and by removing it from your paycheck before taxes are figured, you end up paying less taxes than you would otherwise. For some people, a Cafeteria plan will increase the amount of cash available to them without decreasing their net paycheck at all.

Tip Six: Invest in Education

Whether you are putting money away for your child's education or have returned to school yourself, tuition and other education expenses can be tax deductible, as can the interest on student loans. You can set up special tax deductible savings accounts for your child's future college expenses, too.