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How do you minimize your tax liability?

September 10, 2014  |   Tax Tips   |   Tags: , ,  

Who wouldn’t like a little extra cash in their hand? This can easily be done while reducing your taxes at the same time.

Tax strategizing requires careful planning. Ideally, you’ll attain the lowest marginal tax rate. In order to accomplish this, decreasing taxable income, as well as scrutinizing your deductions and credits can be helpful.

reducing your taxesAnother useful routine in planning your tax strategy is forecasting your income and expenses. This tactic can take a couple of years to master and requires discipline, as well as attention to detail.

When you’re estimating your approximate income, you also have to project the tax bracket you’re going to fall into. The closer your estimate is, the more likely you are to accurately forecast what your tax liability will be.

Lowering your tax bill requires a couple of areas of focus:

  • Take advantage of each business and personal deduction
  • Review any tax credits to determine which ones you’re eligible for

Whatever method you use to reduce your tax liability, make sure you’re within the letter of the law. Tax evasion is basically trying to reduce your tax liability by deception, duplicity or concealment. These are considered criminal tactics, and are not recommended in your financial planning.

Your goals should be to lower your tax bill by forecasting your income, what you’re withholding in taxes and what benefits and credits you qualify for. It’s legal and exceedingly wise.