Tax Credits Having fully worked on taxable income lets now focus on various tax credits which reduces tax. In fact this element is what almost all tax planners focus on because tax credits can be easily manipulated to one’s benefit. There are various tax credits like tax credit for college expenses, for retirement saving, and for adopting children. The maximum tax credits are for adoption and college expenses. It is not possible for everyone to adopt a child but one can always take advantage of the college expenses credit. There are broadly two types of education-related tax credits namely the hope credit and the lifetime learning credit. Students in their first two years of college can take advantage of the Hope Credit. Anyone taking college classes is eligible for the Lifetime Learning Credit irrespective of whether the classes are related to your career or not. If you earn less  [...]

Increase Tax Deductions Another way to reduce your tax bill is by playing around with deductions. Income on which tax is calculated is called the taxable income. It is calculated by reducing deductions and exemptions from AGI. Standard deduction can be taken by almost everyone. However you can play around with your expenses and itemize deductions. Deductions can be of various kinds. The most common deductions are for health care expenses, state and local taxes, personal property taxes, mortgage interest, charity, job-related expenses, tax preparation fees, and investment-related expenses. We suggest that one should keep track of these itemized expenses either using a spreadsheet or personal finance program to enable quick comparison of your itemized expenses with your standard deduction. Also always take the higher of your standard deduction or your itemized deduction. Mortgage interest,  [...]

It is that time of the year again when everyone has taxes on their mind. Not everyone is born a tax expert and for a layman taxes can be quite a confusing topic. This year confusion has only been compounded given the current economic situation. Plus the temporary stimulus tax breaks for housing, cars and energy efficiency announced has further complicated the situation. Below are few tips that will help you to minimise your tax bill. The basics first The age old tax saving rules still applies. This is the time to make charities and invest in tax saving investments. Also we suggest that you give a thought to the kind of accounts for your retirement savings. Until you file your taxes you can fund an individual retirement account for 2009. Before the year end you will however have to declare how much you want to put in the company's 401(k) plan in 2010 and whether you want to invest the money  [...]