Basics of Tax Planning

The main objective of tax planning is to manage your business or personal accounts in a way to minimize the tax liability. A solid tax planning can help to reduce the amount you pay in taxes. There are three 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. Tax liability of a business firm’s are determined on the basis of their adjusted gross income. This is a key measure of your finances. Adjusted gross income of a firm or an individual is very important for tax calculation. Adjusted Gross Income will include income from all sources minus any adjustments to your income. The higher your total income, the higher your adjusted gross income. And it?s obvious the more money you earn, the more taxes you have to pay so as less money you make, the less taxes you will pay. So to reduce the taxes you have to reduce your income.

 

To reducing taxable income there are certain types of incomes on which you don’t need to pay tax as they are totally tax free and it is the good way to avoid taxes so try to earn tax-free incomes as possible. Selling your home, saving money for your children’s education, investing in municipal bonds, contributing to a health savings account, receiving health insurance and spending some part of your salary on health costs and giving some investments to your children all these are included in non taxable income.

Increase your tax deduction is also the good way to decrease your tax liability. Taxable income is another key element in taxable situation. Taxable income is the amount which is left with you after you have reduced your adjusted gross income by your deductions and exemptions. The best strategies for reducing your taxable income are to itemize your deductions, and the three biggest deductions are mortgage interest, state taxes, and gifts to charity.

Taking benefits on tax credits is also the way to reduce your tax liability it helps to reduce your tax. College expenses, saving for retirement and adopting children all comes under tax credits. To avoid additional taxes if it is possible, avoid early withdrawals from an IRA because the amount you withdraw will become part of your taxable income.

At Priority tax our goal is very simple: help people and companies understand their financial plans and if needed advise them. The main objective of Priority tax group is to manage finances of people and companies and keep them abreast of tax payments. Specialists at priority tax evaluate the financial problems of people or a company. While Priority tax group is confident that their personalized consultations are the best in the business, there is no further obligation to use their services.