9 Legal Tax Shelters That Can Reduce Your Tax Bill: Here’s How You Can Legally Cut Your Tax Burden

IRS-approved tax shelters can help taxpayers reduce their tax burden legally without resorting to illegal tax dodging schemes. Here are nine legal tax shelters that can reduce your tax bill:

1. Retirement accounts such as a 401(k) or IRA allow you to defer taxes until retirement, when your tax bracket may be lower.

2. Homeownership allows several deductions related to owning a home, including mortgage interest, property tax, and mortgage insurance premiums.

3. Capital gains from selling a home can be excluded from taxes up to $250,000 for single homeowners and $500,000 for married couples filing jointly.

4. Health Savings Accounts (HAS) allow for tax-free funds to cover medical expenses, with contribution limits increasing to $3,850 for individuals and $7,750 for families in 2023.

5. Angel investors investing in small businesses and startups can qualify for state tax credits.

6. The Child Tax Credit allows up to $2,000 per qualifying child, with $1,500 of the credit refundable for each child.

7. Workplace benefits such as deducting health insurance premiums and contributing to a flexible spending account can lower taxable income.

8. Educational expenses such as student loan interest and tuition and fee deductions can reduce taxable income.

9. Charitable donations can provide a tax deduction for donations to eligible organizations.

By utilizing these legal tax shelters, taxpayers can reduce their tax bill and keep more of their hard-earned money.

A report by Taylor Bell of GOBankingRates on February 24, 2023, largely contributed to this report.