Taxes are unavoidable. Payment of tax is perceived by taxpayers as a burden. Trying to find ways that you can pay less in taxes can be a great relief to individuals.
This guide delineates 8 tips to help you pay less in taxes. Take your time and read through
1. Shift Your Income to Others
You can shift your income to your kids or any other person for you to be in a tax bracket that pays fewer taxes. Individuals who are in the high bracket of taxes should consider this element because it will save them some money. Shifting of income to other people is also known as the splitting of income.
2. Consider Your Filing Status
You may not know this but your filing status contributes a lot when it comes to paying taxes. There are different choices of filing status when. Getting to know their advantages and disadvantages is important because you will be able to choose one that can pay less taxes. For example, we have married filing jointly and married filing separately. Get more understanding of the filing status so that you can take advantage of paying less in taxes.
3. Defer Your Taxes
Deferring taxes means paying your taxes at a later time in the future. Paying taxes later is much better than paying now. One of the benefits of paying taxes later is when there is a forecast of tax rate fluctuations which may lead you to pay less.
4. Tax Rate Reduction
Tax rates may vary from one season to another. When you are earning income from long-term investments you can benefit from these variations in a big way. This is because your profits are taxed in a long-term period. Long term tax rates are lower as compared to income rates.
5. Maximizing Tax Deduction
When you have more deduction you are likely to pay less when it comes to taxes. If you are doing business look at expenses you can deduct from your taxes. It is also important that you take advantage of the qualifying deduction that is given in the tax plan. Tax deductions are legal and as a taxpayer, you have the right to these deductions.
6. Consider the Advantages of Tax Credits
Do you have a tax credit? If you do not have, consider getting yourself one. When you have a tax credit you can avoid paying taxes. Examples of state tax credits include education tax credits and childcare tax credits.
7. Get a Tax-Free Income
Some incomes are exempt from taxes. It is important to consider earning tax-free income because it will be an advantage to you not paying taxes. Examples of this income include benefits from employers, saving money for education and many others.
8. Donation Receipts
Donation receipts are very important because they can help you to save a lot when it comes to paying taxes. Individuals who give donations are likely to obtain deductions when they give to charities that are recognized.
In conclusion, it is important before filing your returns to consider changes that have occurred in tax plans so that you may take advantage of them to pay less tax.