First Metro Asset Management Inc

Ways to Reduce Income Taxes

We tend to agonize over how high our income taxes are, but ultimately we cave in thinking that it’s just something beyond our control.  And then again, income tax rates aren’t actually as fixed as we may think.  The fact is that you can control how much money you pay for your income tax, and there are a number of strategies that you can employ to do so.

One method you can use to reduce your income tax is by developing a system of keeping records of your expenses.  Whatever your case may be for saving on your income taxes would depend on an existing paper trail, such as receipts, to formally verify your expenses and deduction claims should there be an audit.  It would thus be necessary to keep a daily record of all your tax deductions, keeping that data either by electronic means or the old fashioned way; jotting the data on a notebook, and filing the day or week’s receipts with envelopes and folders.  You may even go with both approaches so that you will have both digital and paper backups of your tax records.

Assess your status in your family and determine if you qualify as the head of the family, also known as head of household, for income tax purposes.  Regardless of your marital status, both married and unmarried can be the head of the family as long as you exercise family control or you have dependent members to support financially.  Dependent members refer to relatives including, but not limited to, brothers, sisters, and children.  At least one relative should reside in the same home where you reside.  There is no need for parents to live in the same home provided that you meet the support requirements in accordance with the law.  Husbands and wives filing joint returns pay lower income taxes compared to single persons.

You can also reduce your income taxes by giving away to charity.  You may notice that wealthy people are always making donations to charitable institutions or setting up fundraisers.  But they don’t just do these things out of the goodness of their hearts; they also enjoy tremendous tax benefits out of giving their money away to charity in lieu of paying their dues to the government.  Fortunately, it is not just the rich that can avail of these benefits; even you can donate to an authorized charity and take advantage of such generous tax breaks yourself.  You don’t even have to give in the form of money; your donations could also be in the form of property, such as clothes or even a car.

You can also save on your income tax by paying enough tax in order to avoid penalties.  Otherwise, you would be charged interest if you fail to pay your tax obligations.  Investing in a house can also reduce your taxes, as real estate taxes and mortgage interest are tax deductible, and other deductions like property tax and charitable donations may also be itemized.

Picture Credit:  http://www.antiguaobserver.com

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First Metro Asset Management Inc