Tax planning, it should be done!
During the year, especially during these summer months, most people are thinking of relaxing and planning for a holiday trip, and never thinking about how one’s individual finances are doing, and not planing for the year. So when an individual tax return is filed for the year in (or by) April 15th, and see the resulted high tax liabilities, either because a surprised, or unplanned extra income, or even Congress through its infinite wisdom, decided to change the tax laws. That is the reason there needs to be tax planning.
The best time period to do some tax planning is right now, during the spring/summer months. After all, a tax return is filed on (or by) April 15th, and after seeing the final tax liability figures, that is when one ought to start to think, how and what can I do to reduce my tax liabilities, and maybe here are some things that could be considered:
• Buy a home, because one could claim the mortgage interest and real estate taxes (subject to certain limitations);
• Contribute to charities, there a plenty of charities out who are yearning for such contributions, but be sure to keep firm records.
• If you are self-employed, be sure to have every business expense that was spent for the entire year fully accountable.
• Do not withhold taxes too much from your paycheck. Yes its nice have a tax refund, but one has to realize that a “free-interest loan” was given to the government during, which is not given back until a tax return is filed, and interest would not be given, until after April 15th. So consider just to withhold just enough to pay the expect tax liability.
• Sell some investments, if it is time to be sold, because there is still favorable capital gains tax rates, not as low before, but still lower than one’s normal income tax rate.
• Have some unpaid medical bills, pay them if unplanned extra income has been received, because if paid medical expenses are high enough, a tax deduction could be paid
• Change of one’s personal life, e.g. marriage, divorce, having kids, could dramatically change one’s tax situation.
• Consider contributing towards your retirement, which is the best tax deferral planning technique that is out there.
These are some factors that one needs to look at, and to plan for the year, so there would not be any surprises when the tax return is filed on (or by) April 15th. So, if you need someone to assist on doing some tax planning you can contact us anytime at http://www.kayatax.com/contact-us, and hopefully there will not be any surprises anymore, when the tax return is filed.