|An important part of your financial health is your
tax planning. How well you do this will play a
large part in how much tax you pay. There are
several important aspects to your tax planning.
First and foremost, you should shield as much of
your income as possible from being taxed:
Put as much money as you can into tax deferred
savings & investment plans. Not only will this
shield your current income from tax - It will help
you achieve your long term financial goals. You
can generally save with before tax income - see
the Retirement Planning section.
See related article on Why Your Taxes Will Go
Take all the tax deductions you have available to
you when filing your income taxes. If you are on
a salary, and it’s below $100K, your tax filing
will probably be fairly easy. Your primary
deduction will be the standard deduction.
If you have your own business or have higher
income you will likely want to itemize your
deductions. Even if your income is lower you
may want and need to itemize your filing to take
advantage of specific deductions and tax credits.
An example would be the Earned Income tax
credit for lower income families.
If you own a home and have a mortgage on it you
can deduct the interest portion of your payments
from your income, lowering your tax bill. If you
have a home business, make sure keep track of
all of your expenses so that you can deduct them.
Make sure you follow all IRS rules on what you
can deduct and any limits that apply. It is
important that you keep good detailed records of
all aspects of your business.
Even if you have a full time job, it is possible to
have a side small business. Naturally this will
provide income, but can also provide deductions
against your salary if handled properly. One
must be careful, as it necessary to have a
segregated presence for the business, and follow
other specific IRS rules for the deductions to be
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