5 Tips to Maximize your Tax Breaks
5 Tips to Maximize your Tax Breaks
Taxes can be astronomical for some Americans. There are ways to legally reduce the amount you must pay each year through tax breaks and tax incentives. These can help reduce costs and allow you to use your money on yourself or our family.
Tax breaks are provisions of the income tax code that reduce the amount you and your family have to pay. Some people think claiming tax breaks is cheating – something greedy corporations and rich people do – but it’s not. The famous Judge Learned Hand once stated, “There is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike, and all do right, for nobody owes any public duty to pay more than the law demands.” You are completely entitled to every tax break you qualify for, and not taking those breaks is only giving the IRS a gift they don’t deserve.
Follow these five simple rules when researching tax breaks:
1. Don’t lie. If you can’t exempt, defer, or cancel out a certain part of your income, you must pay taxes on it. Hiding, renaming, or lying about your money is a sure way to get audited, fined, and even arrested in some cases.
2. Do not bend the rules when claiming tax breaks – they are often used to help the economy or other important purposes, and can only be claimed if the terms apply to you and your household. If you are confused and need help figuring out if you qualify, ask a tax professional, because claiming something you shouldn’t might be illegal.
3. Tax credits should always be chosen before deductions. Tax credits reduce the amount that you have to pay on your taxes overall while tax deductions just reduce the amount of income you can be taxed on. It makes more sense to choose a tax credit because if you get a large deduction on your taxes, for example $1000, then you still have to pay a certain percent of your taxes with that $1000 subtracted out. It would make more sense if you just accepted a $1000 tax credit you would likely save more because it is a lump sum since if you accepted a deduction you would only see a certain percentage of the $1000 actually taken off of the amount you owe.
4. File the right
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form. Some tax breaks require you to use a certain tax form. You may need to file the “long form” or 1040, rather one of the simplified forms (1040A or 1040EZ). Be sure to read all the instructions carefully and talk to a tax professional if you have problems.
5. Always be sure to watch out for the alternative minimum tax (AMT). It is also known as the “shadow tax system,” mostly because it does not follow the same rules as regular income tax. It was made in order to keep a certain minimum tax on people no matter how many deductions one qualifies for. Depending upon your income and type of income you may still have to pay the AMT.
You can start taking advantage of tax breaks today by finding out which ones you qualify for.
Learn How to Deduct Mileage for Commuting and other hidden Tax Credits that can save you tons of money.
Ron Finkelstein is NOT a Tax Attorney or an accountant. He is merely a small business owner who has paid a lot of money over the years to learn a whole lot about Taxes and Time Management. I hope you enjoyed learning how to maximize your income tax breaks
5 Tips to Maximize your Tax Breaks / Author: Ron Finkelstein
Occupation: Small Business Owner
Learn how to claim tax deductions for mileage and other small business tax deductions that can save you tons of money. Ron Finkelstein is NOT a Tax Attorney or an accountant. He is merely a small business owner who has paid a lot of money over the years to learn a whole lot about Taxes and Time Management. I hope you enjoyed learning these tax tips for the self-employed
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