Tax-saving Tips For The Everyday Citizen
Are you doing everything in your power to reduce your taxes
? For most people, taxes are one of their biggest expenses. Yet few people take the time to learn even the rudimentary basics of lowering their taxes.
Whether you're an employee, self-employed or a business owner, you can do a lot to keep your taxes down. You don't need to be a math genius or a finance major to do it; you just need to be willing to learn the basics.
Here are a few tax saving tips for the everyday citizen.
==> When You Pay Your Taxes Matter
One thing few people pay attention to is when they file their taxes. Though when you file your taxes doesn't have much to do with how much you actually pay, it can still play an important role in your finances.
If you're expecting a tax refund (E.g. a check in the mail,) you should file your taxes as soon as you can. That way you'll get your money earlier.
On the other hand, if you're expecting to have to pay the government more money, then you should delay filing until as late as possible. That way you'll have more time before needing to make a payment.
==> Know Your Tax Credits
Do you fall into one of the many tax credit categories allowed by your government?
Different governments have different kinds of tax credits for different groups of people. If you have a child, if you're going to school, if you're buying your first home or if you're starting a business, chances are you may qualify for a tax credit.
If you think you might fall into a tax credit category, talk to a tax accountant to see what you might qualify for.
==> Learn to Use Delayed Tax & Tax-Free Investments
There are many investment vehicles that allow you to either delay your taxes or pay no taxes at all.
For example, buying government bonds allows you to earn money without being taxed on the interest.
Delayed tax vehicles can often save you a lot of money. For example, if you put $20,000 into a delayed tax account today, all $20,000 would go into the account (as opposed to a post-tax amount of $16,000 if you were at a 25% tax rate.)
You'll then earn interest on all $20,000 for as long as you keep it in that account. If you're earning 8% compounded over 30 years, that extra $4,000 you saved by delaying your taxes can add up to a lot of money.
Only when you withdraw the money from a tax delayed account will you be taxed on the income. It's essentially a free loan from the government to you to invest with.
==> Should You Itemize Your Deductions?
Figure out what your standard deduction is, then take an educated guess at what all your deductible receipts will add up to. If the latter is more than the former, then you should absolutely itemize your deductions.
This will allow you to save a significant amount of money on your taxes. Yes, it does require you to get in the habit of saving your receipts, but once you develop that habit it's no effort at all.
These are some of the most important fundamentals of saving on your taxes. Tax savings isn't something only the rich need to think about. If you're paying taxes, it makes sense to do everything in your power to minimize the amount you need to legally pay.
by: Angel Noyal
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