Ways to lower your taxes

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  • 1. Ways To Lower Your Taxes Its tax season again. This means that you will be busy trying to figure out what to put in that 1040 form i.e. income, deductions etc. Theres no getting around it; if you made income this past year you will be paying taxes. How much taxes you will pay will depend on your Adjusted Gross Income (AGI). This is the amount from which the taxes that you pay will be based on. The math is pretty simple the higher your AGI the higher your taxes and vice versa. Theres no getting past that equation. There is however, a way for you to pay lower taxes just have a lower AGI. Lets put it this way: your AGI is based on all your income less any adjustments such as credits, tax deferments and so on. But of course, the best way is to simply lower your income so why dont you. For starters, why not put some of your income into tax deferred instruments. Your company 401K plan is a good start. You can maximize your contributions and all money you put in there as well as any interest therein is tax deferred until you take it out starting at age 59 and . This means you will not be paying taxes on that income for the next 15 to 25 years. But more importantly it lowers the income that you make which will then lower your AGI resulting in lower taxes. Take advantage of any and all deductions that you can possibly make. One thing most taxpayers forget is that you can deduct certain things from your income such as healthcare expenses and so on. Youd be surprised as to how many people dont deduct the things they can deduct. Same goes with tax credits. Educational tax credits such as the HOPE credit or the Lifetime Learning credit can lower the actual tax that you pay since it gets deducted from the actual tax you pay based on your AGI. This means that if you have a low AGI you will pay a low tax and with the credits you will wind up paying even less. See whats new from Deborah Koval.