5 Simple Strategies to Reduce Your Tax - Part I

Q. How can I reduce my taxes?

A. Here are 5 simple strategies that everyone can and should try to lower your taxes:

Strategy 1. Earn More Non-taxable Income
You might think every dollar you receive is taxable, wrong!  Below is a long list of non-taxable incomes, try to earn more such non-taxable incomes:

• Gifts, bequests, and inheritances
• Cash rebates (i.g. cash rebate from purchasing a new car or from a credit card)
• Energy conservation subsidies provided by public utilities for purchase or installation of energy-saving devices in dwellings
• Federal Employees' Compensation Act payments
• Workers' compensation
• Accident and health insurance benefits
• Casualty insurance and other reimbursements for theft or casualty loss
• Child support payments
• Accelerated death benefits under a life insurance contract that are paid to a terminally or chronically ill person by the insurance company or a viatical settlement company
• Government cost-of-living allowances for civilian employees stationed outside the continental U.S. or in Alaska
• Foster-care payments, unless you are paid for care of more than five people age 19 or older, or you receive difficulty-of-care payments for more than five people age 19 or older, or more than 10 people under 19
• Military allowances
• Veterans' benefits
• Supplemental Security Income (SSI) payments
• Life or accident insurance proceeds, unless the policy was turned over to you for a price. However, if you cash in a policy, you must include in taxable income any amount that exceeds the total premiums you paid less any rebates, refunds, dividends, or unrepaid loans.
• Living expenses paid by insurance, because of a casualty loss to your home, to the extent the payments compensate for extra expenses you would not have had if the casualty had not occurred
• Long-term care insurance benefits from qualified plans, up to a certain amount per day or a certain amount per year (varies by year).
• Medical savings account withdrawals, if used to pay for qualified medical expenses for you, yourself, or your dependents (withdrawals to pay for health insurance premiums are qualified expenses only if you are unemployed, buying COBRA continuation coverage, or buying long-term care coverage)
• Welfare benefits, including disaster relief grants, mortgage assistance programs, and payments to reduce cost of winter energy

In our next blog post, we will discuss the second tax-reduction strategy - Maximize AGI Deductions.