Both the government and employers provide provide financial support in the form of incentives; and chances are good that you may not be taking advantage of them all.  By passing on them, you’re effectively leaving money on the table…Free money that can have a positive impact on your current or future financial situation. 

Here are a few examples:

• Flexible Spending Accounts (FSA) – An account that can commonly be set up through your employer, it allows you to set aside funds that can be used for qualified healthcare or childcare expenses.  The money that you set aside is not taxed, so your tax burden will be lighter when April 15th rolls around.  Funds that are set aside can be used for common healthcare and childcare items like doctor visits, eyeglasses, over-the-counter, and day care.
• 529 College Savings Plans – 529 Programs are generally regarded by many as the best way to save for college, as investment earnings are tax-deferred and withdrawals are tax-free as long as they are used for qualified education expenses.  By growing your investments in a tax-deferred manner, you can avoid the annual tax expense that would be incurred if you had the money invested in a standard mutual fund, ETF or brokerage account.  Such an incentive is significant, as it can save you from incurring a 15% or higher hit on your investment earnings every year.
• Federal Tax Incentives – The government provides incentives and tax deductions in support of a number of programs.  The incentives offered to buyers of hybrid vehicles have been well publicized; and while they are no longer available for Toyotas or Hondas, the incentives are available for the Nissan Altima Hybrid ($2,350), and all Ford and GM Hybrid vehicles.  Mortgage deductions are another well-known way to reduce your tax burden.  If your tax rate is 28% and you pay $6k a year in mortgage interest, you can reduce your tax bill by $1,680.  The mortgage deduction is one of the good arguments for owning your own home instead of renting.
• State and Local Incentives – Some states and local authorities provide incentives in support of specific programs.  Arizona, for example, provides a deduction when a homeowner upgrades their wood-burning stove.  And the city of Austin provides rebates for homeowners that install solar energy systems.  Such rebates can cover up to 75% of the cost of the system.
• Retirement Savings Programs – Like 529 programs, 401(k)s and similar retirement plans provide individuals with a vehicle to grow their retirement savings in a tax-deferred manager.  In addition, some employers will match employee savings as an additional incentive to promote participation.  That being said, recent research suggests that 20-20% of eligible participates don’t take advantage of this opportunity.

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