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Saving Money on Taxes

by Ira Lanes
June 05, 2009
Death and taxes are pretty much the only things that are certain in this world according to a popular quote attributed to Benjamin Franklin. Well, another thing is certain: no one likes to pay taxes. While taxes are a duty that must be performed, no one likes to part with any more money than he has to. That is why people still find ways of saving money on taxes.

There are many safe and legal ways for you to pay less on your taxes. On a large scale, if everyone refused to pay taxes, the government would crumble. This is why there are certain incentives in place to urge citizens to not only pay their taxes due, but to make sure that they are actually paid.

However, it is perfectly all right for you to make sure that you are only paying the taxes that you should be paying. No one should be paying more than they should be. It is your duty to yourself to make sure you are paying only the amount due and not more than that.

The best way for you to determine you are only paying what you owe the government and not one penny more is to arm yourself with information. Do your research long before tax season starts. Taxation can be extremely complicated and confusing to someone who doesn't have much experience with it. Roll up those sleeves and start burning the midnight oil.

If you are aware of taxation laws, you can use this knowledge to save you money. If your filing is extremely complicated, you can also use the knowledge you have gained as a way to screen potential accountants.

Be very careful when hiring an accountant. Some accountants promise to save you money on taxes and do so on your filing. However, dodgy methods may have been employed. Never sign a filing that you do not understand. Make sure that you comprehend the information on your filing. If the government, at a future date, decides to do an audit and finds that your report is wrong or lacking, the accountant won't be held accountable. You are. So, not only is hiring the right accountant important, understanding your report is just as important.

If you can file electronically, file your returns online. You can get a refund within two weeks and there are fewer errors. Whoever does your taxes or your tax preparer can do the filing for you. If you prefer to do your taxes yourself, you will need software or to go online.

Save money and save on your taxes, too. If you're saving up for retirement, you can add to your retirement fund. You can make Roth or additional deposits. If you are able to qualify for a deduction, funding an IRA can decrease your tax bill. You should note though that there are income limits so know what these are.

Take advantage of tax shelters. Some may say that these are gimmicks or loopholes in the law. However, these have been created by Congress for a reason to serve major economic and social goals.

A tax shelter is any investment you make that is designed to lower your taxes or avoid them to some degree. As Donald Alexander, the former IRS Commissioner said, citizens have an obligation to the tax system but that they also have an obligation to themselves to know what their rights are under the law and to know what possible tax deductions are available and to claim every one of these deductions.

The traditional tax shelters include investments you make in oil and gas, real estate, equipment leasing and cattle feeding and breeding.

The most popular tax shelter is real estate as it provides leverage, a hedge against inflation and cash flow and a buildup of equity.

Don't forget your kids. They can also count as a tax deduction. You can have a child tax credit for a child less than 17 years of age if your AGI as a married couple is $110,000 or $75,000 as a single parent. You can also count child and dependent care credit. You may qualify if you hire someone to watch a child who is less than 13 years old. One child may be worth up to $1,050. Two or more children can qualify for $2,100.

Consider self-improvement as a tax perk. Qualified medical costs that are in excess of 7.5% of your AGI are deductible. These may include prescribed weight loss programs, stop-smoking classes, chiropractic care, acupuncture, braces, glasses, therapy and more. Check IRS Publication 502 to see the full list.

There are other ways you can save on taxes. These are but a few of the options available to you. Knowing what options are available to you to lower your taxes will take a bit of an effort. Research, ask questions, do more research. You will be improving your knowledge of taxation and tax law greatly. This will allow you to take further advantage of any loopholes or exemptions that may exist.

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Saving Money on Taxes




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