How Do I Reduce My Tax Burden Through Savings in Kenya
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When it comes to taxes, nobody likes paying more than they have to. But did you know that you can reduce your tax burden by taking advantage of certain savings strategies? In this blog, we’ll explore some ways that you can reduce your tax burden through savings in Kenya.
Here’s how to reduce tax burden through savings in Kenya
1. Contribute to a Retirement Savings Plan
One of the easiest ways to reduce your tax burden is to contribute to a retirement savings plan. In Kenya, the most common retirement savings plan is the National Social Security Fund (NSSF). By contributing to the NSSF, you’ll not only be saving for your retirement, but you’ll also be reducing your taxable income. The maximum contribution for an individual is KES 2,160 per month, or KES 25,920 per year.
2. Invest in a Tax-Free Savings Account
Another way to lower your tax burden is to invest in a tax-free savings account. The Kenyan government offers a tax-free savings account called the M-Akiba bond. This bond allows you to invest up to KES 300,000 per year and earn tax-free interest. This means that you won’t have to pay tax on the interest that you earn from your investment.
3. Take Advantage of Tax Deductions
There are several tax deductions that you may be eligible for in Kenya. These include deductions for medical expenses, charitable donations, and mortgage interest payments. By taking advantage of these deductions, you can reduce your taxable income and lower your tax bill.
4. Use a Health Savings Account
If you have a high deductible health plan, you may be eligible for a health savings account (HSA). An HSA allows you to save money tax-free to pay for medical expenses. Not only will you be saving money on your medical expenses, but you’ll also be reducing your taxable income.
5. Invest in Tax-Advantaged Investments
Finally, you can reduce your tax burden by investing in tax-advantaged investments. These include investments such as municipal bonds and tax-deferred annuities. By investing in these types of investments, you can earn tax-free or tax-deferred income, which will help reduce your overall tax burden.
In conclusion, there are several ways that you can reduce your tax burden through savings in Kenya. By contributing to a retirement savings plan, investing in a tax-free savings account, taking advantage of tax deductions, using a health savings account, and investing in tax-advantaged investments, you can save money on your taxes and keep more of your hard-earned money in your pocket.
