Do you think you are paying too much on income taxes? Do you think that you are getting all of the credits and deductions you are entitled to? Here are 7 tips to help you minimize taxes and keep more in your pocket.
Participating in company retirement plans is also a must. With every dollar that you contribute, this will reduce your taxable income and thus your income taxes. Enrolling in your company's flexible spending account is another thing you should do. For medical expenses and day care expenses, you can set aside some money. Make sure you estimate well since this money is "use it or lose it."
In order to avoid penalties, you need to make sure that you pay in enough taxes. Uncle Sam charges interest and penalties if you don't pay in at least 90% of your current year taxes or 100% of last year's tax liability.
Buying a house. The mortgage interest and real estate taxes are not only deductible, they may also allow you to itemize other deductions such as property taxes and charitable donations.
Keep your house for at least two years. Today, one of the best tax breaks available is the home sale exclusion, which allows you to exclude up to $250,000 ($500,000 for joint filers) of profit on the sale of your home from your income. However, you must have owned and lived in your home for at least two years to qualify for the exclusion.
Timing your investment sales. If your income is higher than expected, sell some of your losers to reduce taxable income. Sell before the year-end distributions to avoid taxes on the upcoming dividend or capital gain if you will be selling a mutual fund. Also, you should allocate tax efficient investments to your taxable accounts and non-efficient investments to your retirement accounts, to reduce the tax you pay on interest, dividends and capital gains.
If you're retired, plan your retirement plan distributions carefully. Taking money out of taxable investments to keep you in the lower tax bracket is what you should consider if a retirement plan distribution will push you into a higher tax bracket. Another thing you should do is pay attention to the 59- age limit. Resulting in penalties in addition to income taxes are withdrawals taken before this age.
Bunching your expenses. Before you can deduct them (medical expenses must exceed 7.5% of your adjusted gross income and miscellaneous expenses such as tax preparation fees must exceed 2% of your AGI), certain expenses must exceed a minimum. You may need to bunch these types of expenses into a single year to get above the minimum if you want to deduct these expenses. In order for you to achieve this, then you might prepay medical and miscellaneous expenses on December 31 to get above the minimum amount.
Being aware of the tax deductions and credits that apply to you and to plan for taxable events is the most important thing here. And don't be afraid to ask for help. Consulting an experienced tax professional has benefits which far outweigh the cost to hire that professional.
Participating in company retirement plans is also a must. With every dollar that you contribute, this will reduce your taxable income and thus your income taxes. Enrolling in your company's flexible spending account is another thing you should do. For medical expenses and day care expenses, you can set aside some money. Make sure you estimate well since this money is "use it or lose it."
In order to avoid penalties, you need to make sure that you pay in enough taxes. Uncle Sam charges interest and penalties if you don't pay in at least 90% of your current year taxes or 100% of last year's tax liability.
Buying a house. The mortgage interest and real estate taxes are not only deductible, they may also allow you to itemize other deductions such as property taxes and charitable donations.
Keep your house for at least two years. Today, one of the best tax breaks available is the home sale exclusion, which allows you to exclude up to $250,000 ($500,000 for joint filers) of profit on the sale of your home from your income. However, you must have owned and lived in your home for at least two years to qualify for the exclusion.
Timing your investment sales. If your income is higher than expected, sell some of your losers to reduce taxable income. Sell before the year-end distributions to avoid taxes on the upcoming dividend or capital gain if you will be selling a mutual fund. Also, you should allocate tax efficient investments to your taxable accounts and non-efficient investments to your retirement accounts, to reduce the tax you pay on interest, dividends and capital gains.
If you're retired, plan your retirement plan distributions carefully. Taking money out of taxable investments to keep you in the lower tax bracket is what you should consider if a retirement plan distribution will push you into a higher tax bracket. Another thing you should do is pay attention to the 59- age limit. Resulting in penalties in addition to income taxes are withdrawals taken before this age.
Bunching your expenses. Before you can deduct them (medical expenses must exceed 7.5% of your adjusted gross income and miscellaneous expenses such as tax preparation fees must exceed 2% of your AGI), certain expenses must exceed a minimum. You may need to bunch these types of expenses into a single year to get above the minimum if you want to deduct these expenses. In order for you to achieve this, then you might prepay medical and miscellaneous expenses on December 31 to get above the minimum amount.
Being aware of the tax deductions and credits that apply to you and to plan for taxable events is the most important thing here. And don't be afraid to ask for help. Consulting an experienced tax professional has benefits which far outweigh the cost to hire that professional.
About the Author:
Our show quality English bulldog for sale are just what you are looking for - thick, wrinkly and cute as a button.
No comments:
Post a Comment