Reduce Your Taxes Through Mental Power!

reduce taxesIt’s everyone’s favorite part of the year again. No, not Thanksgiving or Christmas – it’s tax time! Right now people are making sure they’ve got all the necessary documents and forms. Perhaps some of you filed early to get your anticipated refund as quickly as possible. Others are procrastinating and pushing back preparation of their returns because they simply don’t feel like dealing with it just yet. Or maybe they know they owe and want to hold onto their cash for as long as possible before forking it over to the government.

Yes, “tax season” is officially upon us in all its splendor. The time of the year when people get excited about how to spend a refund or curse aloud at how much the “tax man” is stealing. What an awesome – or awful – few months!

Tax Season is Not Real

Here’s the catch: the notion of a “tax season” is bogus. That’s right, it’s a contrived term used to describe the period of time leading up to the legal requirement to file your tax returns (or an extension). That date, as we all are well familiar with, is April 15. Why am I bothering to nitpick about the use of “tax season” then?

Because it is “tax season” all year round. You are doing yourself a mighty disservice if taxes only pop into your mind once a year. So many of the decisions you make (or don’t make!) throughout the year influence your tax liability. That’s why it is imperative to constantly think in tax terms.

How to Reduce Your Taxes using Mental Power

The key takeaway and lesson to be learned is this:

Be consciously thinking about how the decisions you make impact your tax bill. Take responsibility by evaluating different options available to you. Be proactive in finding ways to reduce your taxes. Make taxes a part of your regular thought process. Be your own “tax planner.” Doing so could save you thousands of dollars!

Some specific examples of how you can go about doing this include, but are not limited to:

  • Study your returns – If you prepare and file your own returns, then you have a step up on those who don’t. That doesn’t mean those who don’t do their own taxes get to escape from the responsibility of knowing what’s in them! First, I’d encourage you to do your own returns. If you do choose to use a tax preparer, then take the copy of your return and review it. Decipher what’s going on. Trace the numbers back to the supporting documents. Learn how the calculations are done. The same goes if you use tax prep software. Don’t just plug and play. Make an effort to understand the final output. Who knows, you might even detect an error that could end up saving you money when corrected.
  • Study in general – Take the onus to learn up on incomes taxes. Sure, parts of the tax code can be downright complex and confusing. Chances are most of that stuff doesn’t apply to your situation anyway. Search for items that are applicable to your life. For example, let’s say you recently welcomed a child to your family. Research what tax breaks you could receive as a result. You’ll get an additional exemption for that child. Will you be using daycare once both parents are back at work? If so you might discover a dependent care flexible spending account offered through your employer could mean extra tax savings. But, if you don’t proactively seek out these types of tax advantaged options, you’ll just be throwing away money unless you view the government as a charity ūüėČ
  • Health Savings Account (HSA) – Almost all of us incur some medical costs in a given year. Even if you only have a couple dentist appointments and a few visits to the doctor, your co-payments could be tax free. In other words, if you enroll in this work benefit, pre-tax deductions will be made from your paycheck and put into a special account. Then, when incurring qualified medical related expenses, you use this account to pay for them. You won’t be taxed on these amounts. Think about it, if you know you’ll have $1,000 of medical expenses and you’re in the 25% federal tax bracket, you’d save $250 in taxes by using a health savings account. If you aren’t taking advantage of an HSA, then I encourage you to take a look into doing so.
  • Relocation – Is moving to another state possibly on the horizon? Be sure to investigate what will happen to your state income tax liability if you are considering a relocation. By moving to state with lower rates or no income tax at all, then you could stand to save a considerable amount if you retain a similar income level after the move. The opposite holds true too so be sure to take that into account if moving to say California or New Jersey. A new job offer might not be worth if it the raise you’d get goes straight to the state coffers!
  • 401(k)¬†– Increasing your contributions to a 401(k) or similar pre-tax retirement account is a quick and easy way to reduce your taxes. Technically you would be deferring payment of those taxes until you make withdrawals in retirement, but it’s still an excellent way to pay less income taxes. Spend some time evaluating and determining how your retirement planning strategy alters your tax bills.
  • Order online – Even though Amazon is now charging sales tax for residents in many states, ordering online still presents a way to save on taxes since many retailers still don’t collect them. And, ok, we’re talking about sales taxes here and not income taxes. It’s still a good example though of how always being conscious of taxes should have significant influence on your everyday decision making.
  • Home purchase – If you are considering the purchase of a home then you’ll want to evaluate how your tax situation could change afterward. Most people are aware they are able to deduct the interest paid on their mortgage. You should still take the time and effort to analyze all the various scenarios that can play out (different mortgage sizes, rates, whether you are going from renting to owning or simply upgrading to a new house, etc.) and what it’ll mean to what you pay in taxes.
  • Tax friendly investments – There are lots of different investment strategies and options available. There’s no need get get into specifics here, but know there are tax-advantaged investments such as treasuries or municipal bonds where you might not have to pay any taxes on the interest earned. Learn more about them if you’re interested in seeing if these tax advantaged investment options are right for you.
  • Stay on top of current news – You never know when our “buddies” in Congress will pass new laws impacting what you pay in taxes. For instance, you could lose your mortgage interest deduction¬†sometime in the (near) future.¬†Proposed changes to the tax code almost always seem to be on the agenda. You shouldn’t necessarily get caught up in all the constant back and forth between political parties. However, pay attention and be aware of developments that gain momentum and that could become law. It’s better to know how they’ll effect your tax situation sooner rather than later so you can plan accordingly.

How do you approach “tax season”? Is it something you deal with once a year and then forget about until it comes around next time? Or do you pride yourself as being tax savvy and think about the impact of taxes all year around in all your financial decisions?

I’m trying to drive up my Twitter followers, Facebook Likes, and E-mail subscriptions. You can also follow along via Google+, BlogLovin, or RSS. Please help me reach my goals by selecting one or all of these options!

Image courtesy of Tax Credits at Flickr.

21 Responses to Reduce Your Taxes Through Mental Power!

  1. Untemplater March 2, 2014 at 11:29 pm #

    I try to learn at least one new thing about taxes each year. I study my returns like a hawk to make sure there are no errors, and to also try to understand what all the forms are for, and where my money is going. I need to get out of California – the state taxes here are outrageous!
    Untemplater recently posted…An Ice Tsunami Bulldozes Over Homes And Insurance Companies Won‚Äôt PayMy Profile

    • Mr. Utopia March 3, 2014 at 12:26 pm #

      Good for you, Sydney. I’m glad you scrutinize your returns – I know lots of people just blindly accept whatever their preparer or software spits out. And I hear you about California taxes – it’s craziness! I’m a fellow CA resident…the pastures sure look green over there in Texas ūüėČ

  2. DC @ Young Adult Money March 3, 2014 at 9:53 am #

    I don’t think about it just once a year, but I certainly don’t study up on it! I have spent quite a few hours getting our documents in line for tax season and we will be actually filling out forms the last weekend of March. I am pretty sure we will be paying in this year and I definitely want to be more prepared for next year. I plan on increasing our 401k contribution, increasing our quarterly estimated tax payments, and finally reconciling side hustle income once a month instead of just at the end of the year.
    DC @ Young Adult Money recently posted…5 Steps to Turning Your Skills into MoneyMy Profile

    • Mr. Utopia March 3, 2014 at 12:33 pm #

      Yeah, I didn’t mean to imply one needs to study up on taxes so much that they become the equivalent of someone with a degree in taxation! But, learning about the parts of the code that impact you or researching ways you can save money through taxes is just as important than trying to save money elsewhere. DC, your plans to “get on top” of your taxes are great steps to take and increasing the 401(k) contributions is a smart idea.

  3. Holly@ClubThrifty March 5, 2014 at 10:32 am #

    We just did our taxes last week and I’m happy to be getting a return. I say that because I paid in SO MUCH in estimated quarterly taxes that it makes me want to puke. I don’t mind getting a small return, so I’m fine with it. We are researching ways to possibly lower our tax liability in future years, although there aren’t a lot of options for me.
    Holly@ClubThrifty recently posted…Women’s Empowerment WednesdayMy Profile

    • Mr. Utopia March 5, 2014 at 5:38 pm #

      Estimated taxes – the “fun” part of being self-employed. That and the self-employment tax ūüėČ I’m sure there are some ways to lower your overall tax liability, Holly…there’s almost always something.

  4. Syed April 2, 2014 at 7:04 am #

    I’ve taken an interest in taxes this past year and it’s mainly because I did them on my own this time around. It really is an enlightening experience as you see how your own tax is calculated and you can plan ahead to try to pay the less taxes next year. The tax code is certainly complex, but I can’t think of anything more profitable to try to learn.
    Syed recently posted…The Infinite Monthly Payment LoopMy Profile

    • Mr. Utopia April 3, 2014 at 7:25 pm #

      Learning as much as you can about the tax code is definitely a worthwhile investment. And tax planning is big business – CPA’s and financial advisors can make a pretty penny helping clients to reduce taxes via prudent strategies and financial moves (especially high net worth/high earning clients).

  5. What’s up, everything is going perfectly here and ofcourse
    every one is sharing facts, that’s truly excellent, keep
    up writing.
    How To Get Rid Of Acne|New How To Get Rid Of Acne Methods|How To Get Rid Of Acne Tips|How To Get Rid Of Acne|FAQ|How To Get Rid Of Acne Overnight|How To Get Rid Of Acne Fast|How To Gacet Rid Of Pimple|How To Gacet Rid Of Pimple Fast|How To Get Rid Of Acne recently posted…How To Get Rid Of Acne|New How To Get Rid Of Acne Methods|How To Get Rid Of Acne Tips|How To Get Rid Of Acne|FAQ|How To Get Rid Of Acne Overnight|How To Get Rid Of Acne Fast|How To Gacet Rid Of Pimple|How To Gacet Rid Of Pimple Fast|How To Get Rid Of Acne Scars|How To Get Rid Of Adult Acne|How To Get Rid Of CysticMy Profile

  6. Puzzle games October 24, 2015 at 10:17 am #

    There’s certainly a lot to find out about this subject.
    I love all the points you have made.
    Puzzle games recently posted…Puzzle gamesMy Profile

  7. jobs namibia February 27, 2016 at 1:12 am #

    Pakistan – Basant kite festival: The immense kite festival takes place throughout the
    ancient city of Lahore. For more information about current and
    future single travel offers see or contact Travcoa reservations at 800-992-2003.
    But giving up too soon on rejected baby foods is a mistake many new moms make.
    jobs namibia recently posted…jobs namibiaMy Profile

  8. sell a product June 4, 2016 at 3:35 am #

    Do you mind if I quote a few of your posts as long as I provide credit and sources back to your website?
    My blog is in the very same niche as yours and my visitors would really benefit from some of
    the information you present here. Please let
    me know if this alright with you. Appreciate it!
    sell a product recently posted…sell a productMy Profile

  9. nutrition plan June 7, 2016 at 5:56 am #

    You really make it seem so easy with your presentation but I
    find this topic to be really something which I think I would never understand.
    It seems too complex and very broad for me.
    I’m looking forward for your next post, I’ll try to get the
    hang of it!
    nutrition plan recently posted…nutrition planMy Profile

  10. November 19, 2017 at 4:40 pm #

    Here, there is certainly lots of green space and lots of different parks, giving the spot really an Old World look and feel.
    When looking for land available for sale you’ll want to think carefully about these factors.
    Campsite – For those of you that would prefer to pitch your own tent, It also
    features its own campsite. recently posted…https://thuvienduanchungcu.infoMy Profile

  11. December 13, 2017 at 2:45 pm #

    In other cases, these agreements could be the standard
    way of real estate lending inside their jurisdiction. Familiarize yourself with
    certain regulations when it comes to your restrictions on abandoned properties in storage facilities.
    However, up to she adores increasingly being a mommy, she moreover really
    loves being a lady with all of which is constructed of. recently posted…https://phanphoichungcuhanoi.infoMy Profile

  12. January 22, 2018 at 3:52 am #

    Maintenance is the one other area that could be lessen, because less property to maintain translates into less overall spent.

    So, you have to become adults and act like an adult and repent through
    the foolishness of inferior thinking. Lastly, you will need to effect installation of the
    control unit or system. recently posted…ichungcuthudo.infoMy Profile

  13. budget dedicated servers January 23, 2018 at 11:58 pm #

    Thanks for some other magnificent article. Where else may anyone get that type of
    information in such a perfect way of writing? I’ve a presentation next week, and
    I’m at the look for such info. dedicated servers usa
    budget dedicated servers recently posted…budget dedicated serversMy Profile

  14. January 28, 2018 at 11:37 am #

    Now I have sifted through every one of the invitations and I am going to a one-day
    seminar. Today it can be among the richest municipalities in northeast Brazil and is also a significant economic player in your neighborhood with the fifth largest GDP within the northeast.
    Till many years back, before tourism and real estate property Praia do Forte
    took a huge leap, it had been a normal fishing village. recently posted…muabanchungcuhanoimoi.infoMy Profile

  15. creativitylinks blog May 16, 2018 at 6:27 pm #

    It’s fantastic that you are getting thoughts from this piece
    of writing as well as from our discussion made here.
    creativitylinks blog recently posted…creativitylinks blogMy Profile

  16. Serco Careers October 13, 2018 at 8:30 am #

    Very good post. I absolutely love this website. Stick with it!
    Serco Careers recently posted…Serco CareersMy Profile

  17. Shani February 18, 2019 at 11:55 am #

    Thanks for sharing your thoughts about website.
    Shani recently posted…ShaniMy Profile

Leave a Reply

CommentLuv badge