16. Health Savings Accounts
A Health Savings Account (HSA) is usually meant for people who have a high-deductible health insurance plan. Contributing into an HSA can reduce your taxes because the contributions are in pre-tax dollars. Not everyone with a high-deductible plan can qualify for an HSA, and there are contribution limits as well that have changed over time. In 2018, the maximum contribution amount was $3,450 for individuals and $6,900 for a family — and that went up to $3,450 and $7,000, respectively, for the 2019 tax year. This money can then grow without paying taxes on the gains. Generally, HSA funds are used for qualified medical expenses. There are expected minimum annual withdrawals that are expected to be used for medical expenses.
17. Using tax credits
Many expenses can qualify for tax credits rather than just being deductible. While a deduction lowers your taxable income, a tax credit reduces your actual tax bill by the amount of the credit. They are meant to help middle- and low-income households. The higher the income, the less likely a person or family would qualify for tax credits. And depending on the income and status, you might qualify for just a portion. The IRS lists several credits for individuals and families, and it is worth checking your qualification for these, especially for low- to moderate-income earners. Among the credits are the earned income tax credits, which also applied to self-employed individuals; the child and dependents care credits, which helps cover costs of daycare, for example; and credits for education and retirement saving among others.