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Tax Bill

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Too many people simply assume that they don't qualify for tax credits or don't have enough deductions to itemize. You may be passing up significant savings — especially with tax credits that subtract directly from your tax bill. Remember that some deductions are "above-the-line," meaning that you can take them whether or not you itemize other deductions.

If you didn't withhold the proper amount of taxes from each paycheck, you will be hit with a significant tax bill, along with penalties if the underpayment is large enough. You can't do anything to help this year, but you can adjust withholding for 2020 to prevent problems next year.

When you buy mutual funds right before dividends are distributed, your shares drop in value, but your tax bill won't drop accordingly. Buy mutual funds after the distribution to keep your share price high and get the greatest tax benefits.

Tax credits are even more powerful than deductions. Deductions reduce your taxable income, but tax credits subtract directly from your tax bill. Tax credits can be used whether or not you itemize.

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