3 Essential Tax Planning Tips to Consider

Income tax return paperIt’s never too early to work on reducing your 2018 taxes. After all, taxes may drag your net investment performance. It’s just natural to want to protect your investments to the maximum extent. In this kind of situation, getting the services of a great tax preparer or preparation service may spell the difference between saving hundreds or thousands of dollars and over computation and wasting a lot of money.

Majority of people find tax planning in Utah to be complicated and work-intensive. It need not be. Here are three great ways to prepare your taxes to get the most out of your investment.

Reduce income

The key element in determining your taxes is the Adjusted Gross Income (AGI). AGI is your income from all sources less any adjustments to your income. The higher your total income, the higher your adjusted gross income. How do you reduce your AGI? Reduce your income by contributing to a retirement plan. The more money you make, the more taxes you pay. Inversely, reducing your income through investing in a retirement plan will reduce your income, which in turn will reduce your taxes.

Increase tax deductions

Another essential element in computing taxes is your taxable income. When all the deductions and exemptions are deducted from your AGI, you are left with your taxable income. You pay less tax when you can itemize your deductions. One important strategy to ace your tax planning is to keep track of your itemized expenses throughout the year. Items like expenses for health care, personal property taxes, mortgage interests, and investment-related expenses count as itemized deductions.

Make tax credits work for you

One of the best tax credits that you can take advantage of is the Earned Income Credit (EIC). It was created by the federal government to help low- and middle-income families get more take-home pay, and if you are eligible to claim it, it will be credited to your account as payment.

Taking care of your finances is a must. This includes ensuring that your taxes are accurate and are kept to the minimum. Consider focusing on the three components listed here to make it possible.