What Affects Your Tax Liability

Last updated on May 7, 2023

Not only do expenditures impact your tax liability, but also how you plan your finances. To save on taxes, you must be aware of the tax deductions that you can claim. It will help you to plan your finances better as well as save on taxes. Savings are an important method to reduce your taxable income, but you must distribute your savings in such a way that you gain the maximum in tax savings.

If you plan to make charitable contributions in a year, make sure that you ask for a receipt of the contribution so that you can claim the donation on your tax return. Also, ensure that you make the contribution to a registered charitable organization.

Significant tax deductions such as the home office deduction can help you to considerably lower your tax liability. The IRS has made the calculations for home office deductions simpler. Now, you do not need to measure every inch of your office space to calculate the amount of the deduction. You can simply deduct $5 per square foot of your office space.

Expenses on medical costs, business travels and energy-efficient home improvements also lower your tax liability. When making large purchases such as a car, check which vehicles qualify for tax deduction. Even though taxes may not change your decision to buy a particular vehicle, it will help you to save on taxes if the vehicle you choose to buy qualifies for tax deduction.