How Effective Tax Planning Can Save You MoneyPosted on October 26th, 2018
While minimizing your tax liability should be a high priority for you throughout the year, most individuals only think of this shortly before tax season arrives. Tax planning can help you make smart and knowledgeable decisions while reducing your financial liability throughout the year. Whether you own a business, or you simply earn enough to make your taxes considerable, tax preparation can help you minimize what you owe so you can keep more of your hard-earned money.
What is Tax Planning?
Tax planning is the process of planning your financial decisions and purchases, so they can best reduce your taxes owed. A financial professional, such as a CPA, can help you create a well-devised strategy using their extensive current tax law knowledge, tax code, and new tax regulations, while also leveraging this knowledge to your advantage.
By creating proactive tax saving strategies to help you reduce your post-tax income, you can significantly reduce your overall liability.
Helping Reduce Tax Liability While Saving You Money
When partnering with a tax professional, you work together to come up with several strategies to legally reduce your taxes liabilities, thus, in turn, allowing you to keep more money in your pocket.
Increase your tax deductions– taxable income is a key element in your overall tax situation. Taxable income is what is left over after you have reduced your adjustable gross income or (AGI) by your deductions and exemptions. These may include expenses for health care, state and local taxes, personal property taxes, mortgage interest, charitable gifts or donations, job expenses, and investment-related expenses.
The ideal strategies for reducing your taxable income is to document your deductions, with the three biggest deductions being mortgage interest, state taxes, and charitable gifts or donations.
Take advantage of tax credits– tax credits can reduce your tax liability. There are tax credits for college expenses, saving for retirement and for adopting children.
It is important to try and also avoid additional taxes. If at all possible, avoid early withdrawals from an IRA or 401K retirement plan. The amount you withdraw will become part of your taxable income, and there will be additional taxes to pay for the early withdrawal.
Increase your withholding– you can avoid owing at the end of the year by increasing your withholding. More money will be taken out of your paycheck throughout the year, but you will get a more significant refund when you file your taxes.
To receive the expert tax planning you deserve, contact Logan & Associates Ltd. today! Our Highland Park firm is experienced in helping individuals and small businesses alike achieve long-term tax success.