Tax Planning Strategies to Lower Your Taxes

 

Taxes are one of the biggest expenses you may face in your lifetime, and they are an important component of any financial plan. However, they are also a complex area of finance that can be difficult to understand. That is why it is important to work with a trusted advisor who can help you identify and implement strategies that will reduce your taxes, save you money, and prepare for the future. Find out for further  details  right here https://www.wealthability.com/blog/tax-articles/top-10-tax-planning-strategies/. 

The End of the Year is a Perfect Time to Review Your Taxes

 

Every year, tax laws change and that can make it challenging for individuals and business owners to determine how their tax situation will change. The best way to deal with these changes is to take a proactive approach. Learn more  about  tax advisor, go here wealthability.com. 

 

Consider working with a wealth management advisor to perform an income tax projection to see where you stand. This will help you determine if there are any surprises ahead of the year that you will want to address before it is too late. Take  a look  at this link https://en.wikipedia.org/wiki/Tax_advisor  for more information. 

 

The projection will also allow you to make adjustments to withholding and estimated tax payments that can eliminate or reduce penalties or postpone the payment of taxes if possible, thereby reducing your overall tax bill.

 

Another benefit of making a projection is that it can be used to determine whether you should itemize deductions or choose the standard deduction instead. The standard deduction increased in 2017, so many people who once itemized may be better off choosing the standard deduction and saving more money.

 

Cash-basis tax planning is a technique that involves holding off sales until the next year to lower taxable income. This can be done by crop farmers who hold off grain until harvest or by cattle breeders who keep cattle in their herds for several days or weeks until they are ready to sell them.

 

This can help businesses save on their tax liability by allowing them to defer payment of a taxable income until the year after the tax is due, and enables them to shift deductible expenses and/or revenue into different tax years. The company can also use a net operating loss carryforward that is due to expire in the current tax year to offset the taxable gain on the sale of the machine that generated the loss, and thus, lower their tax burden.

 

The long-term goal of this type of tax planning is to reduce the amount of taxable income for an entity, which will help create a more positive cash flow and increase revenue for the company, thereby boosting its growth and profitability. This is a strategy that is useful for both small and large businesses, and can be applied to individual taxpayers as well.

Restricting the Accrual of Profits and Losses

 

Reducing a business’s taxable income is not only good for the bottom line, but it can also be beneficial to the health of the company in terms of its reputation and its competitiveness within the market. The following are some common tax planning techniques that can be used to achieve this goal:

Using the Value of an Asset as a Tax Credit

 

A good example of this is the use of a net operating loss carryforward to offset taxable gains on a sale. Entwhistle Electric, a manufacturing firm in Colorado, for example, uses this approach to reduce its tax burden.