Minimize How Much Tax You Pay By Tax Planning

The purpose of tax planning is to reduce your tax liability. Effective tax planning can lower your tax obligations through deductions, allowances, exemptions, and exclusions. Many taxpayers fail to plan long-term, which frequently results in taxpayers paying more than they need to each year. Tax professionals, such as CPAs who focus on taxes, or enrolled agents, can review your tax situation and construct a plan to reduce your tax obligation. In some cases, tax planning saves taxpayers thousands of dollars.
Understanding the Basics
To develop an effective tax strategy, you must:
• Maintain accurate tax records,
• Understand what tax deductions and tax credits you are or potentially could take advantage of,
• Carefully determine whether you are better off taking the standard deduction (the flat deduction offered by the IRS) or itemizing, and
• Understand strategies to reduce your tax bill, including tax shelters.
Strategies That Could Reduce Your Taxes
Long-Term Capital Gains: This can help you grow your net worth and yield tax reduction opportunities.
Launching a Business: Even a side business can provide tax advantages, such as expenses that can be deducted from income. If you work from home, you may be able to deduct a portion of your home expenses from your income.
Health Savings Account (HSA): Whether you own a business or are an employee with a high deductible, placing money into an HSA will save you some money on taxes.
Tax Credits: You may be eligible for one or more tax credits that will save you money on your taxes.
Tax-exempt bonds: Interest payments plus the income they produce could be exempt from federal taxes.
Maxing out your 401 (K): This will reduce taxable income for 2019 by $19,000 and $19,500 for 2020.
You should consult with a tax professional to determine what is the best strategy for you. If you are our client, we will gladly provide you with complimentary unlimited tax planning advice.
Professional Tax Services is a locally owned provider serving over 3,500 local residents and businesses. For more information call 661-259-1967 or visit www.protaxservices.com. Through their complimentary EZ2 Thrive program, they provide unlimited free tax planning advice to their clients.