Learn How to Pay Less Taxes in 3 Easy Steps

Every year, taxpayers ask that burning questions: “How can I pay less tax and get the biggest refund ever?”

As they stare that almighty tax form right in its black and white face and try to figure out where they can reduce the amount of their tax liability, they are looking for tax relief.

Would you like some tax relief?

Fortunately, finding that one deduction or that other method to reduce the amount of tax owed is easily done. It’s just a matter of knowing what to look for and where to find it.

One great way to take advantage of all of the deductions available is tax planning. Having a plan in place can help reduce the amount of tax that is owed.

Lets say you have high income with a few deductions, our tax tips show how starting a home based business, or taking advantage of little know write-offs can reduce your tax bill.

The idea behind deductions is to lower your taxable income.

This means taking all your eligible deductions on real estate, taking advantage of tax exemptions, and increasing withholding tax when necessary. There are approximately 350 tax deductions that you can use to reduce your taxable income and your income tax rate.

We have three steps to reducing your tax bill. No matter your level of income, here are three ways for you to pay less tax:

1. Look at your withholding tax: Tax law is an amazing thing. You control the amount taken from your paycheck with Form W-4. This form is usually filled out when you start working. Form W-4 may be changed at any time with your payroll department. This means that you can designate more tax to come out of your paycheck based on exemptions. Each exemption is worth money that can increase your take-home pay. We recommend looking at your withholding exemptions annually. Couple this with analysis of your most recent tax return.
2. Look for additional deductions: There are two types of deductions: adjustments and itemized deductions. Adjustments include student loan interest, teacher’s expenses, and the cost of tuition and books for students (post high school). Itemized deductions include contributions to charities and mortgage interest paid on your home. Refinancing your home increases the mortgage interest deduction while giving you more cash in hand. Make sure you seek tax advice. Our free newsletter can help. You can reduce your income tax rates by going over all of your deductions. There are commonly overlooked deductions such as child tax credits, charitable contributions, and job related deductions like mileage, home office, or meals.
3. Start a home based business: For many, business ownership has become a path to financial freedom. Home based business owners are able to take deductions that others cannot: home office, telephone, internet service, office supplies, etc. When you start a business the initial deductions may offer tax refunds, and as the business begins to make money, the continuing deductions provide financial freedom. Noted tax accountant Sandy Botkin says that having a home based business can bring $3,000 - $9,000 in tax savings. Please check out our “Tax Guide for Starting A Business” for more information.

The point is: “Why should you pay more than you have to?”

The tax relief you will experience will be quite significant as long as you follow these steps. Always take the option to itemize your deductions and make sure you keep track of them throughout the year. That way it’s easy for you to claim everything that’s yours.

Tax planning will decrease your tax burden Good record keeping also protects you in an audit and provides support for all those deductions you are taking. Finally, choosing a good tax professional helps in planning, preparing, and audit-proofing your tax return. Check out our free report, “Choosing a Tax Professional.“