Approximately, two million American taxpayers are levied by the IRS every year.
Don’t be one of them. Make sure to pay your taxes and file them on time. As the year 2015 approaches its final months, it’s the right time to plan and make some moves to lower your income tax.
Apparently, tax planning is a process in which you’ll use all your knowledge and helpful tools in order to estimate your income tax and to reduce your taxable income, thus, you will find a way to pay fewer taxes.
Tax season is usually from January 1 to April 15. It’s the given period when you need to prepare and file your tax return, but tax planning throughout the year can eliminate stress and other repercussions regarding taxation.
If you want to help yourself in cutting down your income tax, take advantage of the favorable tax provisions and avoid paying more. After all, you have the option of paying less through careful planning and guidance.
Here are Some Ideas on How to Reduce Income Tax Bill
1. List Your Allowable Deductions
When filing your tax return, it’s recommended to list your qualified deductions separately and provide the needed documentation for each of them in the case of an IRS audit.
Some Allowable Deductions for Taxpayers are as follows:
• Medical and Dental expenses – Medical care including health insurance premiums could help you save on your income tax bill.
• Taxes you paid – In some states, the other taxes you pay may be deducted to your income tax bill.
• Interest you paid – Home mortgage interests and other interests you pay may be tax-deductible.
• Your Gifts to Charity - You’re donations and effort for charitable works are deducted to your tax bill.
• Casualty and theft losses – Losses incurred because of a casualty, disaster, or theft may be tax-deductible.
• Job-Hunting Expenses – You can deduct job-hunting expenses from your income tax like transportation cost, food, lodging, etc.
2. Know your Dependency Exemptions
In our current tax law, you can claim more or less $4,000 as dependency exemption for children under 19 years old or a full-time student under 24 years old. It can be only be done if you provide more than half of the child’s support for the year. Give extra support before the year ends, so that you’ll be ensured that you’re in the half-support mark.
3. Maximize your contributions to 401k or IRA
Yes, maximizing your contributions to your retirement savings such as the 401k or the IRA may lower your tax bill and help you be one step ahead towards financial security. The money you’ve put on one of these plans will not be included in your taxable income. This year, the tax law allows you to contribute up to $18,000 to a 401k and $24,000 if you’re 50 years old and above.
4. Be Wise with Family Income
If you know that you’ll be in the high tax bracket this year, you might consider transferring some of your income-producing property to your family members who are in much lower brackets like your children or grandchildren. By doing this and if you’re lucky to pull it through, you will save about 29% in every $10,000 earnings. It’s the best way that you can have the benefits of the so-called “kiddie tax.”
5. Education Credits
If you’re an eligible parent, you’re entitled in one of two credits for qualified higher education expenses. The American Opportunity Tax Credit (AOTC) max at $2,500 for every student. Your qualified expenses paid this year for academic terms from January to March next year count for calculating your allowable 2015 tax credit. Pre-paying such expenses by the given period will let you increase your tax credit this year.
6. Selling your Property? Consider Installment Payment
The rule of the book states that income from a sale of the property is fully taxable in the year of the sale. However, if you arrange an installment agreement of the real estate sale, where the buyer spreads out payment over a couple of years or more, you’ll just pay tax on payments in the year that you receive them. It will not only make the payment terms convenient for the buyers, but it will also make you have the benefit to be in the lower tax bracket in multiple years.
Relief on Tax and IRS Problems
Now, consider this, the Federal tax code has grown to over 70,000 pages and there are at least 480 different tax forms used by the IRS. Tax planning is more than just the paperwork and it requires experience and expertise to comprehend its technicalities.
Fortunately, Financial Rescue LLC can help you with all of your tax and IRS problems.
Our assurance for the best results is that our partners are Certified Tax Attorneys, Certified Public Accountants, Former IRS Agents and Managers that will guide you through every taxation process you may find confusing with all of its technicalities.
Give us call right now at 1-877-97-33287 for a no-cost, no-obligation consultation with tax professionals.