SAVING ON TAXES
Taxes are among the civic duties required of a citizen of a country. There are different forms taxes take and in this article I would highlight on areas you can save through totally avoiding taxes on certain goods and services or minimizing the deductable amount due in taxes. Saving on taxes is not a criminal act neither does is need you to open offshore bank accounts or lauder money. The first step toward saving on taxes is building an understanding on how your countries federal and local tax system works. In most countries federal tax laws provide tax breaks for certain acts or events such as, marriage, having a baby, or some types of savings accounts. Tax breaks are not limited to major changes in your life as other actions such as charity and volunteer work can earn you a tax break. A major way of earning tax breaks is through income. Tax free income is achieved through various ways amongst which are saving for your children’s education and medical care, frequent contribution into a health savings account, investing in municipal bonds, health insurance from employers also ears tax breaks and other investments and actions depending on the country your are in. Another way of earning tax breaks is by taking advantage of tax credits. Tax credits are aimed at encouraging certain actions such as the purchase of a hybrid car, energy
conservation measures in your home like low wattage consumption or addition of a solar panel in your home. Taxes can also be deferred till a later date. Deferment of taxes is possible on mostly saving accounts such as the retirement/ pension fund were at the end of your carrier the taxes are paid in lump sum at a significantly reduced rate. Deferment of taxes is like getting an interest free loan from the government. You can also take advantage of your filing status and exemptions. Your tax filing status can have a huge impact on the amount of deductions made in taxes. The filing status used in tax forms is used to calculate the tax bracket you fall into, it is also used to calculate the type of personal exemptions you are eligible for. Some type of tax exemptions are spousal related, children and other dependents related and others of like nature. Everyone is not entitled to tax exemptions because they are dependent on income and certain restrictions are put in place. For high income earners in a high tax bracket, there is a simple way to avoid paying those high taxes imposed on you due to your income. Taxes can be shifted from individuals in a high tax bracket to those in a lower tax bracket. This can be done by investing in your children by putting them on an income or funding trusts in their name. the act of shifting income tax is also known as income splitting. As it is your civic duty to pay taxes, it is also your responsibility to know how your tax system works and which benefits you are entitled to. Knowing how your tax system works can save you a lot of money by the end of the fiscal year.