Individuals facing an overwhelming tax burden have options to lower their tax bills. Whether the tax bill is from income or property taxes, knowing the right strategies can help lower that bill and make it more manageable. Strategies include evaluating a home’s value to address high property taxes and offering a large lump sum to reduce the amount of back taxes owed.
Homeowners Can Ask for a Copy of Their Property Tax Card
A home’s property tax card provides valuable information about how the assessor determined the cost of the property taxes. This card will provide important details about the home, its fixtures, improvements, and features. Reviewing this card will show homeowners if the property is taxed for features it does not have, in which case the home’s owner can ask for corrections or a re-evaluation of the property tax. This could result in a reduction of the property tax, as the property’s value is reduced.
Appealing a Property Tax Bill
Another tool homeowners have is a tax appeal. A tax appeal asks the assessment office to look more closely at the home’s value to determine if it is accurate. If the appeal gets approved, it does not lower the property tax bill by lowering the rate. Rates are set by the government and only change when they change for the whole community. Rather, it lowers the assessed value of the property. Since tax rates are a percentage of the assessed value, this may effectively lower the bill as well. Some people will enlist the help of a tax attorney for a tax appeal to increase their chances of success.
Contributing to Retirement Accounts
If an income tax bill is high, one way to lessen it is to add money to a 401(k) or IRA account. These accounts are allowed to grow tax-free until retirement, so money placed in them is not taxed. Contributions to these accounts count for the tax year as long as they are made by the tax filing deadline. Contributing up to the limit on these accounts puts more money into the retirement plan, which will help in the future. It also pulls that money from the taxable income for the year, thus reducing the tax bill.
Claiming Business-Related Expenses
Many people are working from home or starting a side hustle to bring in more income. These provide opportunities to reduce tax bills by lowering taxable income. Taking a home office deduction or deducting the cost of office supplies and other business-related expenses will make the taxable income lower for many households, thus reducing the tax bill.
Offer in Compromise Can Help with Back Taxes
If the tax burden is from income taxes, an option to consider is an offer in compromise. This tool lets someone ask for a lower tax bill in exchange for one flat payment for a large portion of the debt. By paying all at once, the debtor can receive a discount on the total debt. Working with an attorney who understands tax debts helps get an offer in compromise approved.