Lowering your tax bill is no easy feat. No matter how much you love Fluffy, your cat is not a dependent that can score you a deduction. And, you can't deduct the cost of a gym membership, even if the doctor told you to get in shape. However, there are a few ways to lower your taxable income and tax bracket to keep more money in your pocket.
Your tax rate is determined by the amount of income you earn. If you can use deductions to chip away at that income until you're in a lower tax bracket, you might be much richer come April. So save your receipts, hire a professional if you need help, and always check for updates to the tax code.
The key to "cheating" on your taxes is to reduce your taxable income as much as humanly possible. Also, do not actually cheat on your taxes. The risks dramatically outweigh the potential rewards, and the likelihood of getting caught is high. Never attempt to conceal income — just use every tool at your disposal to make less of that income taxable. Here are five ways you can reduce your taxable income:
Tie the knot
It's not recommended that a person get married just to save a few bucks in April. But if you're considering taking the plunge, marriage makes tax time cheaper in almost every case. New York public accountant Joseph Boyce said that 95 percent of married couples do better filing jointly because it's a lower tax rate than filing separately.
Use a tax-deferred 401(k)
When you contribute to your employer-based retirement plan, not only are you saving for life after your earning years, but you're lowering your taxable income. Every dollar you contribute is a dollar less that will be taxed in April.
If your employer does not offer a retirement plan, or if you're self-employed, an individual retirement account can offer the same tax perks. You'll pay taxes on this money when you retire, but you'll avoid the burden now while you're trying to save. Roth IRAs are excellent retirement vehicles for some investors, but they are not tax-deferred. Try to get as close to the maximum contributions allowed by the government, which is currently $5,500 a year for IRAs (if you're under age 50) and $18,000 for 401(k)s in 2015.
Donate
Generally speaking, certain charitable donations and contributions can be written off as deductions to help lower your taxable income, and thus your tax bracket. However, this is not the case for labor or services such as volunteer work. On the IRS website, you can find a list of eight steps to deducting charitable contributions.
Look for a job
If you're unemployed and actively looking for a job, there are ways you can get tax deductions during your employment search. Many job-hunting expenses are tax-deductible, as long as you're looking for a job in your current line of work, as opposed to trying to switch careers or land your first job. You might be able to deduct travel expenses if you had to take a trip to look for a new job. Resume costs and placement agency fees can be deducted, too.
Go to school
Students — or whoever pays their education-related expenses — are entitled to several tax deductions for higher education. You can reduce the amount of your taxable income by up to $4,000, according to the IRS. Related expenses can be written off, too. For people in some tax brackets, interest paid on student loan debt also can be deducted.