Why is tax planning essential for every individual?
Posted by theincometaxmasters on June 20th, 2020
Tax planning is necessary only for affluent, and enterprises is a big misconception. Proper tax planning can be beneficial for any individual to increase income by reducing tax liability. Whether you are a US citizen, an international business owner, or a green card holder, tax planning has more benefits than you can realize.
Benefits of tax planning
As stated above, the main benefit of tax planning is to minimize tax liability through various methods of deduction. Here are some of the popular methods useful to reduce taxes:
Lowering your taxable income
One of the most important things to keep in mind while planning for taxes is to keep an eye on the Adjusted Gross Income (AGI). The Internal Revenue Service (IRS) defines it as gross income minus any adjustment to the income. That means the AGI will increase for a tax filer with an increase in the taxable income, resulting in more taxes. It has an impact on the tax rate, access to tax credits, and other benefits.
The method used to lowering AGI is by having a retirement plan at the workplace. Employees contributing to the retirement plan will have lower wages, and consequently, a reduced tax bill. However, this method does not apply to every individual. Experts providing professional tax preparation services can guide and assist in creating a personalized tax plan according to a situation.
Avail available tax deductions
A tax deduction is an expense that is subtracted from the taxable income. The tax deduction is an integral part of the tax planning with every filer has at least one deductible expense in a financial year. Enterprises or wealthy persons may have more deductible expenses. Here is a list of deductible expenses available in the US:
Donations to charity
Health care expenses
State and local taxes
Apart from the expenses listed above, tax filers may have access to many other deductions and exemptions that are not listed here. The skilled Texas tax preparer can guide through this process of availing all these deductions that you are eligible in various circumstances. However, you need to keep track of deductible expenses to take advantage of sections in tax codes and reduce tax liability.
Uses of tax credits
A tax credit is an amount of money that can be utilized as an offset tax liability. Tax credits are different from deductible but related to filer’s marginal tax rate, which increases or decreases according to one’s income.
The tax credits can be used for college expenses, retirement savings, and the adoption of children. The earned income credit (EIC) is credited to a beneficiary account like the tax refund. You may be entitled to a tax credit in various circumstances. Thus, it is necessary to consult with a certified accountant while planning for your tax.
Leading tax preparation company in Dallas, TX
Need help from CPAs and enrolled agents in filing your taxes? The Income Tax Masters is a leading company that has been serving clients with tax planning and processing income tax returns. Get professional Income tax services Dallas Tx to enjoy peace of mind in processing complex taxes according to guidelines. Book tax experts for services now.Also See: Tax Planning, Tax Liability, Tax Credits, Taxable Income, Tax, Planning, Income
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