The end of any financial year significantly disturbs the calm nerves of the taxpayers who start thinking over the ideas taking them through this testing phase. As a taxpayer one must remember, saving tax money is not an impulsive affair that needs fine-tuned thinking all the year.
A taxpayer should be on the lookout for all the possibilities that could save his hard-earned money from the clutches of inevitable taxable norms. There are plenty of ways by which instead of paying taxes; a taxpayer can keep that money safe in some other form. All he as a taxpayer needs to know is how to save his taxable amount.
For that he should be crystal clear in drawing a fine distinction between taxable and nontaxable incomes.
Here Are 5 Ways to Reduce Taxable Income
1. Gifting to folks:
Worrying about showing assets to the government, which could raise the tax liability? Playing safe by gifting some property of yours to your son, daughter or father can be an apt option for you in this context. Since the property received as a gift or in a legacy doesn’t come under the income tax law.
2. Get your or loved ones’ life insured
Having got a life insurance policy, you needn’t worry thereon. Since the Tax is not deducted from the insurance proceeds. So whenever the tax amount goes beyond what isn’t affordable to a person he can go for such kinds of policies which make him savor the taste of tax exemption.
3. Loans against education
Claiming loan against the children’s upbringing or education is another way you can lower your tax amount. It signifies the interest rate at you’ve been granted loan will be deducted from your present tax amount to be paid.
4. Charitable contributions
Charitable contributions offer a tried-and-tested way to reduce the tax bill – and there are a number of ways to give back beyond writing a check. Toys, books, clothes and other used household items may be donated to shelters or other charitable organizations that support the needy. Expenses stemming from volunteer work can also be a tax benefit, but be careful about what you try to deduct: Your time itself is not deductible, but if you absorb the cost of travel to an event where you represent the charity – whether as a convention delegate or as a scoutmaster driving scouts to a campground – those expenses may be deductible. If you buy an item such as a printer and donate it to a charity for its own use, that also may be a write-off. And remember, your total tax deductions must exceed the standard deduction before they may be applied
5. Medical or Traveling expenses
During any time of the year you’ve fallen ill. Apart from losing health you can have financial benefits at the same time. File carefully all those medical related bills on the behalf of which you can get tax exemption. On the same note, having traveled round the year for conferences, company’s promotion or any sort of official work and paid restaurant and hotel bills, you can get a tax rebate on the grounds of those bills.
Not stopping here, making a health saving account and depositing taxable money for these kinds of accounts or investing money in various kinds of employee’s ongoing schemes can provide you much needed income tax relief.
The tax will be deducted according to the income tax bracket your annual income lies in. Suppose you get succeeded in showing up the tax paid by you is more than the tax liability, the extra money you deposited will be given back to you under the name of tax refund/ tax rebate.
So start chalking out a plan how you’re going to get the income tax relief before you regret losing money that could be saved otherwise.
We’ll help you determine what’s deductible and whether the standard deduction or itemizing will give you the best results. Our IRS tax attorney also gives you suggestions for lowering your tax bill next year.