Paying Less Income Tax
Arranging your finances to keep your tax liability as low as possible is the primary aim of tax planning. This is most often accomplished either by lowering your income or by making your income larger.
Reducing Income – The total you make from every avenue of income, except any adjustments to your income, is called your Adjusted Gross Income, or AGI for short. The more money you make the higher your AGI will be, and therefore the more money you will pay out in taxes. Obviously the less your AGI the less you pay. If you wish to lower your AGI then the quickest way is to pay into a retirement plan where you are employed. The amount you pay into this plan will lessen your overall wages and therefore your tax bill. There are several other ways in which you can lower your AGI, such as expenses for school, payment into an individual retirement account, the payment of alimony and any interest you pay on student loans. There are other avenues you can take, all of which will be found on the website for the tax office in your country.
Increase Your Tax Deductions – Your filing status and number of dependents determines the amount of your standard deduction as well as personal exemptions and these can be increased by such things as getting married or increasing your number of dependents. You may be a person who is able to itemize your deductions such as health care, state and local taxes, personal property taxes, mortgage interest, charitable donations, work-related expenses, fees for tax preparation and expenses related to your investments. You should compare your standard deduction and your itemized deduction and file using the higher of the two.
There are other things you can do to reduce your income for tax reporting purposes. You can check out investment funds and tax credits, for example. All of these strategies add up to a large savings on your taxes. The particular options specific to your situation will vary, but it’s worth looking into. You can search online, but taxes are pretty confusing. If you really want to get serious about reducing your tax burden, you should really hire a specialist who can advise you and guide you through the process. It may seem counter intuitive to spend money in order to save it, but a tax specialist makes it their business to know all the ins and outs of taxes.
You’re never going to be exempt from paying taxes. However, it’s highly likely that you’re paying more than you have to right now. A tax professional can help you find deductions and exemptions that would never occur to you. A quality, knowledgeable tax professional more than earns their fee. If you get your taxes to a manageable level through exemptions and deductions, it can mean the difference between paying a lot in taxes or a little.
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