The key to reducing your income taxes is to plan ahead. Far too often, individuals wait until it is time to file their tax return, and by then it is too late for many of the tax-reducing strategies. A little organization and planning can lead to significant savings on your income taxes. Listed below are three options to consider when planning your tax reductions.

Retirement Planning

If your company offers a retirement plan, such as a 401(k), and you are not taking advantage of it by contributing, you are losing out on a significant tax savings opportunity. Any contributions you make, along with any employer matches, will grow tax-deferred until you withdraw the funds when you retire. If you are taking advantage of your 401(k) and plan on increasing your contributions, do it earlier in the year in order to increase your savings over time.

Health Savings Accounts (HSAs)

Health Savings Accounts (HSAs) are similar to Flexible Spending Accounts (FSAs) in the sense that they allow you to use pre-tax dollars toward medical expenses that you incur throughout the year. In order to be eligible for an HSA, you have to have a high-deductible health insurance policy (this typically includes an annual deductible of $1,000 or more, depending on the coverage). Premiums are typically very low for high-deductible plans, allowing the money you would have spent on a higher premium to be put away tax-free in your HSA. The amount you can contribute on a yearly basis is equal to that of your deductible. You then use this money to pay for any health insurance expenses until your deductible is met and your insurance company starts covering your costs. An attractive feature of HSAs is that you can carry over any money that you don’t use each year, unlike traditional medical savings and flexible spending accounts. The money you have left over will grow tax-deferred until you retire.

Charitable Donations

An excellent tax savings opportunity that is often overlooked is donations to charitable organizations such as the Salvation Army, Goodwill and other similar charities. Typical donations include clothing, furniture and various household items. Before you contribute, make a list of the items you’re donating and give each one a price, typically what you would expect to pay for the item at a garage sale. The IRS has pricing guidelines available for typically donated items. For your records, retain your item list and make sure you receive a receipt for your donation from the charity. These contributions can save you hundreds on your taxes.

Saving money on your taxes requires organization and planning. There are many different options to consider, and what works for someone else may not work for your particular situation. Taking the time to learn about the different options that may be available to you is worth your time and will save you money in the long run.