The goal of tax planning is to arrange your financial affairs so as to minimize your taxes. There are 4 basic ways to reduce your taxes, and each basic method might have several variations. You can reduce your income, increase your deductions, and take advantage of tax credits.
The 4 basic ways to reduce your taxes are:
1. Reducing your income - Adjusted Gross Income (AGI) is a key element in determining your taxes.
2. Increase Your Tax Deductions - Taxable income is another key element in your overall tax situation. Taxable income is what's left over after you have reduced your AGI by your deductions and exemptions.
3. Take Advantage of Tax Credits - Once we've tweaked our taxable income, we are ready to focus our attention on various tax credits. Tax credits reduce your tax. There are tax credits for college expenses, for saving for retirement, and for adopting children.
4. 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 bigger refund when you file your taxes.
Give us a call today to see how we can help you with all of your Tax Planning whether it is for long-term, annual or mid-year tax planning and also tax forecasting for the next year.