There are various ways by which you can lower your taxes. The success of all these depends on how careful you plan everything it entails. You need not engage in illicit activities just to achieve this goal because the law allows certain methods that are helpful to most taxpayers.
Strategies to help you lower your taxes
Reduce your income
It is a fact that when you have a higher income, you will have higher taxes to pay. To lower that income and legal dues, there are certain adjustments which you can take advantage of. One of this is having a retirement plan as early as now. Ask your employer how you can go about this with their help. Your employer can directly deduct from your wages your contributions to this plan. If you are receiving smaller wages, you can lower your taxes substantially. Besides this, your adjusted income is also key when dealing with mortgage lenders, banks and other programs that provide financial aid.
Increase tax deductions
It is a great advantage if you are knowledgeable of the legal deductions. If possible, keep a list of them. They include payments for health care premiums, personal property taxes, mortgage interest, investment-related expenses gifts to charity, tax preparation fee, and job-related expenses. Keep track of all these deductibles by collecting all the documents and receipts connected to them. Have a spreadsheet for all these so that you can easily make needed comparisons. Just like what most tax planning strategies entail, start early with all your bookkeeping activities to avoid problems down the road.
Use dividends for your pay
When most business owners consider their pay, it never occurs to them that they can save the business money by utilizing the National Insurance Contributions’ (NIC) exemptions. Dividends, unlike regular pay, are not subject to NIC deductions and this will save your business this highly needed cash. If the dividends fall below your pay, consider integrating a small salary and add the dividends to top up your pay as you might not even part with PAYE if the pay falls below the current threshold.
Utilize tax credits
These credits are usually allotted saving for the retirement and college expense, for adopting children. Of the three, credits for colleges expenses are the most utilized. Whether you are single or married, you can always take a college class to improve your career. If by any chance your married life has been childless, credits for adopting children can help you have a complete family. Lastly, you can arrange as early as now a retirement plan that can aid your needs in the future as an elderly. Saving for retirement is something worth reducing your taxes for.
Although these procedures are said to be tried and tested, their observance requires your utmost patience and time.