Do you ever feel like you take home less of your paycheck than you were expecting? Well, let’s see if there’s a way for you change that with tax breaks you may not know about.
When was the last time you talked to your human resources department about your benefits? Here are four things to do to keep more of each paycheck. You may be surprised at the tax savings you can get by opting in to available plans or adjusting the amounts that you contribute.
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Contribute to a 401k
A 401k is a retirement savings plan that allows you to contribute your wages pre-tax so that you can maximize the amount you’re investing and pay tax later. Many times employers match “dollar for dollar” up to a certain amount. If your employer offers a matching plan always contribute the maximum amount, it’s almost like free money.
Flexible Spending Accounts
An FSA (Flexible Spending Account) is like a small health-related bank account; sometimes it even comes with it’s own credit card. This plan can be paired with other health plans that your company offers to decrease the amount of medical expenses that you pay for yourself during the year. Many people use these plans to pay for glasses, contacts, doctor’s office copays and other small health expenses – effectively reducing the cost of those things by 15 to 40 percent, depending on your tax bracket.
Child Care Expenses
If you have kids, then ask your employer about child care. Even if your kids don’t need daycare, read the rules of your plan and you may be surprised at what is covered — summer camp? Babysitters? If your employer doesn’t offer any child care, not to worry. You can still potentially claim the Child and Dependent care credit. This credit allows you to reclaim some of the money that you spent for childcare so that you could work — $3,000 for one child or $6,000 for two or more children.
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Many employers allow you to buy “commuter checks,” which can be purchased with pre-tax dollars and can be turned in for public transportation passes or tickets. Different states have different rules on what these vouchers can be spent, so ask your HR person for the details.
Hopefully, as your employee benefit programs change, you are informed of them. However, sometimes work gets busy and these types of forms are shoved into a drawer somewhere. So, have a chat with the person who handles your benefits and make sure that everything is in order — it may just save you some serious money.
Mitchell Fox is a tax nerd and the co-founder of GoodApril, the first online tax planning solution for consumers. GoodApril offers a free “Tax Checkup” service to help you identify actions you can take to reduce your taxes. You can follow Mitch and GoodApril on Twitter at @mitchellwfox and @goodapril.
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