Are you one of those individuals that stress out at the thoughts of April 15th rolling around? Yes, the famous tax day. I am more than sure you don’t like tax season unless you are in the tax preparation business. For the rest of us out there we don’t like it and can’t keep up on all the changes and revisions that the IRS puts out there for us to follow, is there anything you can do to reduce some of the stress? A way to help you not to pay out so much or help you gain a tax return. Yes, you can look into tax planning.
Tax planning you can do on your own or you can look into hiring a professional to do your tax planning for you. Tax planning is the arranging of your finances to help minimize your taxes. There are three basics to look at to help reduce your taxes. You can look into your deductions, income and tax credits.
With your income you can find ways to reduce your income. This doesn’t mean take a pay cut but finding ways to invest some of your earned money in company offered benefits like a retirement account, 401k. Investing in your company offered plan would take your contributions off your gross income causing you less money to be taxed on. This is the best way to lessen your income. You can also reduce your adjusted gross income by listing them on the 1040. You can list your retirement contributions, student loan interest paid, if you pay alimony and any job expenses like supplies. Tax planning can help you do these.
Tax planning will have you look at your deductions. Your taxable income is what is left after you have listed your deductions and exemptions. When you are tax planning you can take deductions for health care expenses. You also have your personal property taxes and mortgage interest. Another area to deduct is in charitable donations. Giving tithe to your church as well as donations given to charities are charitable tax deductions. Items donated to Good Will are an area of deduction, have them give you a receipt of your donations and keep this with your tax planning files. You must keep track of all these items and file them away for tax time.
Tax credits are another are to look at when tax planning. These tax credits reduce your taxable income. There are various credits out there, be sure to ask your tax planner about them if through out the year to see if they qualify. These credits can be for retirement savings, college expenses. There are home improvement tax credits as well as green living tax credits. Another area to remember is adoption credits.
Tax planning is very important. If you can hire a professional it would be money well spent, if you choose to do it yourself, be up to date on the tax laws and be very organized.
