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Ways To Reduce Income Tax
Ways To Reduce Income Tax
Finding ways to reduce income tax is a good way to keep your own hard earned money. It has been said that the rich stay rich because, among other things, they have a tax strategy. Too many people leave a lot of money on the table because they simply accept what the Internal Revenue Service tax tables and forms tells them to pay. They fill-out their annual tax returns hoping to get something back in the form of a tax refund. Like so many other things, hope is not something to be relied upon, action is what brings results.
First of the ways to reduce income tax is to develop a system to keep records and receipts of expenses. Any other tax advice will be dependent upon there being a paper trail verifying expenses and claims for a deduction. That means one should be thoroughly versed in using a daily system to record claims, deductions, and expenses. That could mean keeping an electronic trail with paper back-up or it could be old school with envelopes for a day or week's expense receipts. Do not forget about a notepad or smart phone app to record other details like mileage.
Second among the ways to reduce income tax is to start a home business. There is no better way for someone to take advantage of tax breaks than to be in business for oneself. You would be amazed at the ventures that celebrities, professional athletes, etc. are in to help with their taxes. It doesn't have to be a grand scheme to get rich, it could even be fun. Perhaps you could take your hobby to the next level or start a business online. A good CPA would be worth the money to consult with. He or she can help you decide on what kind of business you could start. The government provides a lot of tax-breaks to business owners.
The third way to reduce income taxes is to start giving. You see the rich giving to charity all the time and they get kudos for it. However, they also have the motive of giving to charity rather than giving to the taxman. It can have some benefit for the small player too, as you could give property like a car charitable donation or clothes to Goodwill. Just get a receipt for any donation under a value of $500. If a donation is above $500 then things get trickier and you should consult a tax specialist.
There are plenty more ways to reduce income tax but these are just some beginning actions. One other thing to do is to seek a real tax expert. The best are CPA’s and tax attorneys, but they are also the most expensive. Some former IRS agents do consulting and they would be good. Seasonal tax preparers like H&R Block, Jackson Hewitt, and Liberty Service are OK, but you should know that not all of their staff are experts. Some just went into training that tax year and rely upon their computer system to help them find a tax write off or two. Just be aware that you may not be getting all you can with them. The same goes for tax software.
Still, if you have a tax strategy you will still be much further ahead than you were without one. Planning is the key for when looking for ways to reduce income tax.
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