3 Little-Known Ways to Lower Your Taxes

You may be able to pay the IRS less.

Most taxpayers can probably agree on one thing: They'd rather lose less of their earnings to the IRS than more. The good news is that you can take steps to lower your tax burden. Here are a few strategies you may not have known about.

1. Donate goods to charity

You may be aware that if you itemize on your tax return (as opposed to claiming the standard deduction), you can deduct cash donations to registered charities. For example, if you write a $100 check to a registered charitable organization, that's $100 of earnings the IRS won't tax you on (again, assuming you itemize deductions on your return).

But it's not just cash donations that are eligible for a tax write-off. You can also deduct donated goods -- things like used furniture, clothing, and toys.

Now, there is a catch. If you're going to deduct the cost of donated goods, you can only claim a write-off for their fair market value, not their original cost. So, let's say you bought a new dining room set five years ago for $3,000, but at this point, due to its age and condition, it's only really worth $1,000. In that case, you're looking at a $1,000 deduction, not a $3,000 one. But that's far better than nothing.

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2. Take losses in your brokerage account strategically

The investments in your brokerage account are supposed to make you money. But sometimes, it could pay to sell stocks and other assets at a loss.

If you have an underperforming stock in your portfolio and you sell it for a price that's lower than what you paid for it, you'll have a capital loss on your hands. And capital losses can be used to offset capital gains so that if you've made money on an investment by selling it at a profit, you may not owe taxes on that profit (or on a portion of it).

Capital losses can also be used to offset up to $3,000 of ordinary income per tax year. So, let's say you take a $4,000 loss this year, but you're only sitting on $1,000 in capital gains. You can use your remaining capital loss to cancel out $3,000 of the salary your employer paid you.

3. Claim above-the-line deductions

You might assume that if you don't itemize on your tax return, you won't get the option to claim individual deductions. But some deductions are known as above-the-line deductions, and you're able to claim them even if you don't itemize.

One such deduction is IRA contributions, up to the maximum allowable limit that's set each year. This year, it's $6,000 if you're under 50 and $7,000 if you're 50 and older. If you're a teacher, you can also claim educator expenses up to a certain amount that changes from year to year. This year, it's $300.

Know your tax breaks

The more you read up on tax rules, the better positioned you'll be to lower your taxes. It could also pay to sit down with a tax professional who can walk you through some options and give you tips on how to pay the IRS less.