How to Reduce Your Personal and Business Taxes

Taxes are special kinds of fees or charges that the government requires people to pay in order to live and work in their state or country. The government needs money to operate, and taxes are a way for it to get this money. They are unavoidable, but you can minimize the impact they have on your bottom line. Every scenario is different, but one thing is universal: Planning is the key to taxes. There are different kinds of taxes.  For example, people that have jobs pay taxes on the money that they earn from working, and states usually have sales tax that you pay when you buy something in a store.

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Here is some brilliant financial advice form Adam Greene CPA: become a scholar of the tax law. If you know the tax law and take every tax deduction to which you are entitled, it is going add up to significant savings over the years. For this reason, the Internal Revenue Service website offers resources to help you understand the following tax deductions and credits. Study the credits well, as those benefits reduce your taxes dollar by dollar. Keeping a tax-reduction mindset in your everyday life will serve your finances well, and so, by spending a few hours each year keeping abreast of the tax law, you can save a lot on taxes over the years. Do not count on a tax preparer to know every deduction for which you are eligible. As a consumer you should know the tax benefits you can claim. Every additional deduction you claim increases your disposable income.

So, what can you do to reduce your personal and corporate taxation? Here are some additional financial advice in order to reduce what you pay in taxes:

Starting a savings plan will encourage good habits. Consider setting up a regular transfer into an investment that automatically takes place when you receive your pay, before you spend any of your income. This “investment” could be a high interest savings account, for example, which allows you to take advantage of the power of compound interest. When calculating the cost basis after selling a financial asset, make sure to add in all of the reinvested dividends. That increases the cost basis and reduces your capital gain when you sell the investment. Alternatively, if you have a mortgage then this could mean putting additional money in an offset account, which then reduces the interest payable on your loan.

Take a retirement account. This contributions are a top tax-reduction tool and allow you to deduct from your taxable income the amount paid into the retirement account. Also these funds, grow tax-free until retirement. If you start early, this strategy alone can secure your retirement.

Combine a vacation with a business trip, and reduce vacation costs by deducting the percent of the unreimbursed expenses spent on business from the total costs. If you work for yourself or have a side business, take the home office deduction. This allows you to deduct the percent of your home that is used for your business, for example, if the guest bedroom is used exclusively as a home office, and it constitutes one-fifth of your apartment’s living space, you can deduct one-fifth of rent and utility fees for your home office. Have in mind that the Lifetime Learning Credit is great for boosting education and training. This credit is worth a maximum of $2,000 per year (up to 20 percent of up to $10,000 spent on post-high school education) and helps pay for college and educational expenses that improve your job skills.

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By being charitable, every donation over $2 you make to a registered charity is tax deductible. Your donations don’t come straight back onto your tax refund.  They are subtracted from your taxable income, which means you get a percentage back (depending on your income and taxation rate).

It's also important to understand that taxes are not based on your gross income, but on a taxable income, that can be reduced by deductions. While people with many deductions will itemize them on their tax returns to maximize their refund or lower the amount of taxes they must pay, those without them will use the standard deduction provided by the government to calculate the tax. Simple commitments such as paying down debt or saving more can have a dramatic impact on both your financial and emotional wellbeing. Creating a plan and sticking to it is the first step.

Finally, claiming deductions is one of the best tools in reducing your overall tax payable. If you have to spend money during the year and it relates to earning your income, then keep the receipt and make sure you claim a deduction in your Corporate Taxation for what you are entitled to. Even if you use the item for part work and part personal, you can still to claim an apportioned deduction. If you are not sure whether you can claim a particular item, keep the receipt and ask later, when you prepare your next tax return.