How to Reduce the Tax Burden
Nowadays, people have major tax liabilities. Even families with lower income struggle with taxes. Daily living expenses such as the electric bill, your mortgage, and your children’s school burden most people, making life difficult and at times stressful. After paying for health insurance, retirement plans, paying your monthly expenses and putting money away for savings, you must also think about tax payments. It is a continuous cycle.
Fortunately, the IRS code has 70,000 pages full of tax deductions, credits, loopholes, and strategies that you can use to pay less taxes. We call these 'green lights' to go ahead and do it!
The following tips can be a great way to provide a considerable tax reduction taking advantage of the IRS code and the ‘green lights’. Great planning skills, organization and attention to detail are key skills to have before getting started.
One way of reducing taxes is to be proactive in your tax planning. There are several adjustments that can be done in order to successfully lower your tax liability.
Generally, the more money you make the more taxes you will pay. Contributing to an employer’s retirement plan will help reduce the amount of your taxable income. One of the most popular employer’s retirement plan is a 401(k). This contribution will help reduce your monthly/annual salary and because you are using pre-tax dollars to contribute to your 401(k). This will help reduce your tax liability.
Another strategy to reduce the tax income is to take advantage of all the deductions allowable by the IRS. Examples of these deductions are expenses for health care, state and local taxes, Real Estate Taxes paid on your house, tuitions and fees, donations to charity and others. Using a spreadsheet to organize your expenses is a good idea and will help to keep track of your family or individual finances. This will also help you with budgeting.
If someone works at home, they can take advantage of the home office deduction. You may be able to deduct a percentage of rent and other home expenses as a business expense. The home office space must be used exclusively for business.
Using tax credits
Tax credits are another tool that can be very helpful to reduce the amount of taxes that an individual may have to pay. There are many examples of tax credits like tuition credits, retirement savings and adoption credits. If you have investments, you may be eligible for a foreign tax credit. For taxpayer’s with children you may qualify for a child tax credit as well as the child and dependent care expense credit.
Taking some college classes may be a great option for most people. They can learn new things, improve their knowledge and get a degree that will help create more opportunities for their career or their future. There are two types of tax credits for educational purpose, the hope credit and the lifetime learning credit. The first one is for students that are in their first two years of college, and the second one is for any person that wants to take college classes.
Being aware of how taxes work and taking advantage of all tax deductions can be a life saver. Always staying on top of things can help save a lot of money in the long run. Small things like contributing to a retirement account, health savings account can make a big difference. Charitable deductions are also another great way to reduce tax costs. The disposable income increases with every dollar of tax savings. Being smart and curious about taxes can be one of the best ways to become tax efficient.
The best option is to hire the professional from Palm Beach Tax Group. They can do all the tax planning for you and you can get expert help without any problems. Palm Beach Tax Group specializes in proactive business tax planning and helping individuals with tax planning. Wait no more and contact us at http://www.palmbeachtaxgroup.com/ right away!