The steps to create your own tax savings
INDIANAPOLIS (WISH) — Over the past month we outlined how the new tax law will impact you, your family and your business. But the reality is, there have always been quick easy steps you can take and it can save you a lot of money.
“There’s no doubt that tax planning should be an ongoing process,” said Tiffany White, a financial planner with Halter Ferguson Financial in Indianapolis.
White said savings could be to the tune of thousands of dollars potentially. But, she said people don’t think ahead often enough to take advantage of those savings.
She sat down with 24-Hour News 8 to offer tips on some quick steps to save money.
One idea is to set up a 401(k) through your employer. It’s a way for you to save for retirement tax-free as it’s invested in the stock market.
White said many Hoosier businesses offer employees an option to put a percent of their paycheck into a 401(k). And she said many employers offer matching percentage.
“Do whatever it takes to get the full employer match because otherwise, again, that’s just dollars left on the table,” she said.
Another way to save for retirement is an Individual Retirement Account, also called an IRA, which unlike a 401(k), You don’t need a job to sign up for one.
But like a 401(k) it’s protected from taxes.
For both the 401(k) and IRA, you face a 10 percent penalty if you withdraw before you turn 59.5 years old. If you pull it after it does get taxed but without a penalty.
White said you can save on your healthcare costs if you have a low-premium high deductible plan. She said those plans are most suitable for people who do not believe they will have expensive doctors’ visits.
In order to take advantage of that, you need to have what’s called a health savings account.
You can put money in without being taxed to help pay for the doctor. You can save on your tax returns and potentially health care costs.
There are state tax benefits you can target, too. You can put money into a 529 plan, which you can learn more about here.
There’s also a deduction for donating to Hoosier universities.
You can also look to federal tax deductions for education costs, through the American Opportunity Credit and the Lifelong Learning Credit.
“So tuition, room and board, books, computers are a lot of time acceptable expenses,” said White.
It’s never too early to start planning and you don’t need to wait for a tax law to start saving.
White said she recognizes some families do not have that luxury and are living paycheck to paycheck.
In that case, White said it’s important to budget your expenses year round.
“Every last penny is going somewhere but knowing where every single as much as possible the categories of where your money is going because money is power and that will help you be proactive in saving money,” she said.
“Even though you don’t have that extra dollar to invest or to save there are still ways you can save money by just trying to plan ahead and think ahead a little bit and that parlays a bit into having that cash bucket and putting as much as you can into the 401(k) and getting as much from your employer that you can.”
This is the last segment in the Money Monday series. Below are the links to watch any of the past stories about the new tax law:
- Overview of the biggest changes
- Will filing your taxes finally be simpler?
- Tax law impact on families
- Tax law impact on college planning
- Tax law limits federal deductions on state property and income tax
- Tax law changes structure of alimony payments
- Tax law affects businesses large and small
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