You may spend a lot of time dreaming about ways to make more money. If you are not paying so much attention to how your income is affecting the tax obligation, you are not looking at the whole picture. If you keep more money in the pocket it clearly means reducing the amount of money you spend on taxes every year. Just a bit of planning and good strategy, you can keep the amount you spend on taxes low this year. If you want to minimize tax liability follow these strategies and reduce your tax bill and lower your tax bracket.
Try to reduce the adjusted gross income. The total income is known as the gross income. It is reduced by subtracting the expenses which you do not have to pay taxes on. It is known as deductions. After the deductions are removed, then you will have what is known as the adjusted gross income. However, the lower the AGI, the less tax you will have to pay.
Switch from standard deduction to itemized deduction on the tax return. It means better record keeping during this year and a longer tax form to fill out and also gives you the chance to optimize the deductions. The Financial web folks suggest to keep a track of expenses like personal property taxes, health care, mortgage interest and charity donations on a spreadsheet the whole year. When the time comes to calculate the taxes, you need to compare the standard deduction with itemized deductions. So choose the one that lowers the AGI the most.
Use the tax credits that are available to you. The tax credits are deducted from the amount you owe in taxes. If there are credits for adopting a child, attending college and investing in retirement savings such as 401k plan.
Reducingthe tax liabilitycan bedonein several ways,reducingthe incomeor Adjusted gross income,increasingthe deductionsand using the tax credits. Use tax professionalswho will help youthroughthe possible deductionsand credits available, taxlawsarecomplicatedand changing constantly.