Date: January 1, 2010

News - Tax Planning Tips

In order to reduce your taxes, it’s important to first understand how your taxes are calculated. Adjusted Gross Income or (AGI) is comprised of your income from all sources less any adjustments to your income. The greater your AGI is, the greater the amount of taxes you will pay so it makes sense to try to reduce your AGI.

There are several ways to lower your AGI:

  • Maximize your 401k deductions. This allows you to lower your taxable income. Any earnings you have from your investments are tax-deferred until you receive a distribution.
  • You can deduct the interest on a camper or boat. You are allowed to deduct interest on your primary residence and one other residence. As long as the camper or boat has cooking, bathroom and sleeping facilities it may qualify as the “other residence.”
  • Take advantage of the Health Care Reimbursement and Dependent Care plans that your company may offer. 
  • Keep track of all medical expenses throughout the year. There is a threshold you need to meet in order to be able to deduct medical expenses on your taxes so that is why it is important to maintain good records all year long.
  • Donate money or items to a charitable organization. Make sure you receive a receipt from the organization showing the items donated and their value.

Increase your withholding from your pay that way you will reduce and may even avoid owing taxes at the end of the year.

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