There are many things in life we try to plan. We try to plan for home and car purchases, the future of our children, and our retirement. Not many people plan their income taxes because they do not know anything about it. Is income tax planning? Why is it important?
The most important part of tax planning is to minimize your taxes. income tax planning involves determining the tax laws that apply to you. Everyone has a different revenue situation that would fall under specific laws. To make sure you reduce your tax liability, you need to make the tax plan, which can be done in three different ways.
The first way is creating a plan for income tax through your adjusted gross income. The AGI is the result of subtracting and adding certain aspects to your income.
Things like investment added to your salary, while things like mortgage payments subtract from your salary. Higher total AGI means greater tax liability. If you want to reduce your tax liability through your adjusted gross income, starting a retirement plan such as a 410k. When you add money to this plan, your income is reduced, which in turn lowers your tax liability.
Most people assume that the tax cuts only for business owners. Itemize your deductions so helpful. Many people can reduce things like health care costs, the cost of car registration, your mortgage interest, and charitable gifts.