When you’re fortunate enough to work for a company that offers an employee benefit package, it’s important to know what tax-saving options are available to you and how to maximize those options for the greatest financial advantage.
For starters, if you’re not socking away money in a 401(k), you’re missing out on one of the biggest tax breaks going. As an employee with access to a 401(k), you can divert up to $16,500 into the plan before taxes. For workers 50 or older, that pre-tax dollar amount jumps to $22,000. By setting aside as much as you can out of every paycheck, you’ll soon be on your way to a significant nest egg, especially if your 401(k) plan includes a matching employer contribution.
Another area where your benefits can really pay off is through flexible spending accounts (FSAs). Used to cover the cost of qualified medical and dental expenses, FSAs let you set aside a portion of your salary pre-tax. With health care expenses rising, you want to make sure you’re doing everything you can to rein in costs. Putting money into an FSA is a smart way to avoid paying taxes on allowable health care expenses.
Other substantial tax perks may be available from your employer if you have child care costs or education expenses. In the case of child care, if your employer has a dependent care program, you could be eligible to exclude up to $5,000 of those costs from your taxable wages. That’s a larger tax perk than the standard child care credit. The exclusions are even higher for workers getting educational assistance through an employer. As long as you qualify for the program, you can omit $5,250 from your yearly taxable income.
Surprisingly, not all employees seize the tax advantages available to them. If you’re looking to make the most of your tax-advantaged benefits, get in touch with the specialists at Taxation Solutions, Inc. In St. Louis and beyond, we’ll help you plan for a bright financial future!