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In this part of our page, you can find the latest news of the month, such as new regulations, laws, updated cases, current news, among others.

 

For more specific questions on any particular topic, please write and we will respond as soon as possible.

15, January 2019

Tax Planning - Ways to Reduce Your Taxes

 

The goal of tax planning is to arrange your financial affairs so as to minimize your 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.

 

Reducing Income

 

Adjusted Gross Income (AGI) is a key element in determining your taxes. Lots of other things depend on your AGI (or modifications to your AGI)-- such as your tax rate and various tax credits. AGI even impacts your financial life outside of taxes: banks, mortgage lenders, and college financial aid programs all routinely ask for your adjusted gross income. This is a key measure of your finances. Because your adjusted gross income is so important, you may want to begin your tax planning here. What goes into your adjusted gross income? AGI is your income from all sources minus any adjustments to your income.

 

The higher your total income, the higher your adjusted gross income. As you can guess, the more money you make, the more taxes you will pay. Conversely, the less money you make, the fewer taxes you will pay. The number one way to reduce taxes is to reduce your income. And the best way to reduce your income is to contribute money to a 401(k) or similar retirement plan at work. Your contribution reduces your wages and lowers your tax bill.

You can also reduce your Adjusted Gross Income through various adjustments to income. Adjustments are deductions, but you don't have to itemize them on the Schedule A. Instead, you take them on page 1 of your 1040 and they reduce your Adjusted Gross Income. Adjustments include contributions to a traditional IRA, student loan interest paid, alimony paid, and classroom-related expenses. A full list of adjustments are found on Form 1040, page 1, lines 23 through 34. The best way to boost your adjustments is to contribute to a traditional IRA.

As you can see, two of the best ways to reduce your taxes is to save for retirement, either through a 401(k) at work or through a traditional IRA plan. Contributions to these retirement plans will lower your taxable income, and lower your taxes.

 

Increase Your Tax Deductions

 

Taxable income is another key element in your overall tax situation. Taxable income is what's left over after you have reduced your AGI by your deductions and exemptions. Almost everyone can take a standard deduction, and some people are able to itemize their deductions.

Itemized deductions include expenses for health care, state and local taxes, personal property taxes (such as car registration fees), mortgage interest, gifts to charity, job-related expenses, tax preparation fees, and investment-related expenses. One key tax planning strategy is to keep track of your itemized expenses throughout the year using a spreadsheet or personal finance program. You can then quickly compare your itemized expenses with your standard deduction. You should always take the higher of your standard deduction or your itemized deduction.

Your standard deduction and personal exemptions depend on your filing status and how many dependents you have. You can increase your standard deduction and personal exemptions by getting married or having more dependents.

The best strategies for reducing your taxable income is to itemize your deductions, and the three biggest deductions are mortgage interest, state taxes, and gifts to charity.

 

Take Advantage of Tax Credits

 

Once we've tweaked our taxable income, we are ready to focus our attention on various tax credits. Tax credits reduce your tax. There are tax credits for college expenses, for saving for retirement, and for adopting children.

The best tax credits are for adoption and college expenses. Not everyone is in a position to adopt a child, but everyone could take some college classes. There are two education-related tax credits. The Hope Credit is for students in their first two years of college. The Lifetime Learning Credit is for anyone taking college classes. The classes do not have to be related to your career.

You may also want to avoid additional taxes. If at all possible, avoid early withdrawals from an IRA or 401(k) retirement plan. The amount you withdraw will become part of your taxable income, and on top of that, there will be additional taxes to pay on the early withdrawal.

One of the best, and most abused, the tax credit is the Earned Income Credit (EIC). Unlike other tax credits, the EIC is credited to your account as a payment. And that means the EIC often results in a tax refund even if the total tax has been reduced to zero. You may be eligible to claim the earned income credit if you earn less than a certain amount.

 

Increase Your Withholding

 

You can avoid owing at the end of the year by increasing your withholding. More money will be taken out of your paycheck throughout the year, but you will get bigger refund when you file your taxes.

15, December 2018

Happy holidays! Tis the season for family, friends, food, and of course ... last second tax moves! While time is running short, consider some of these moves you can make to cut your tax liability. Also, retirement contributions are rising for 2019. The second article lays out the changes for you.Did you know that there are billions of dollars of unclaimed property each year? Read on to find out how to search for yours. Finally, there's an article explaining the new qualified business income deduction and what you can do to prepare for it.Call if you would like to discuss how any of this information relates to you.

15, November 2018

It's November and the holiday season is upon us. With the end of the year less than two months away, now is the time to exhaust your year-end annual checklist. Attention we have notice for retirees regarding their federal tax withholdings, consult us about how the IRS examines a business during an audit and some questions about the turkey you can use to impress your friends.

 

Call if you want to talk about how this information relates to you. If you know someone who can benefit from this newsletter, feel free to resend it.

 

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Newsletters

15, January 2019

15, December 2018

15, November 2018