TAX PLANNING
3 Ways to Reduce Your Taxes
The goal of tax planning is to arrange your financial affairs to minimize your tax exposure. There are three basic ways to reduce your taxes and each method has several variations. To reduce your tax liability you can reduce your income, increase your deductions, and/or fully utilize tax credits.
It is important to be aware that each country has unique tax laws that allow us to mitigate your tax liabilities.
Reduce Your Income
Adjusted Gross Income (AGI) is a key element in determining your taxes. AGI is your total income from all sources minus any adjustments to your income. The most popular way to reduce taxes is to reduce your income by contributing into a retirement plan. Your contribution reduces your wages, and lowers your tax bill.
Increase Your Tax Deductions
Taxable income is another key element in your overall tax situation. Taxable income is what is left over after you have reduced your AGI through deductions and exemptions.
Your standard deduction and personal exemptions depends on your filing status and how many dependents you have. You are allowed a larger standard deduction and personal exemptions if you are married or have many dependents.
The best strategies for reducing your taxable income are to itemize your deductions, and the three biggest deductions are mortgage payments, state taxes, and gifts to charity.
Take Advantage of Tax Credits
Tax credits also reduce your tax. The two tax credits that give you the biggest advantage regarding taxation are adoption and college expenses.
You may also want to avoid additional taxes. If possible, avoid early withdrawals from any retirement plans. The amount you withdraw will become part of your taxable income, and on top of that there will be additional taxes to pay on the early withdrawal.
How to find out more about Tax Planning?
Please contact us for further information.