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Incorporate Tax Benefits in Your Personal Finance Plans

By Charles Hopkins Published 09/19/2006 | Finance

Incorporate Tax Benefits in Your Personal Finance Plans

For most of the Americans, the story repeats time and time again; the last date of filing taxes is just one week ahead and in all your hurry for rustling up a quick recipe for tax deferred investments, you are forced to make some bad investments. If you are among those people who think about clearing the tax bills when the year end is approaching, you must realize the fact that tax savings is a year long process. It requires a good amount of research too. What you need to do is make some intelligent savings all through the year to escape the reach of the income tax bite. There are other ways also to keep your tax bite at a minimum.

The tax free investments are the best way of reducing the tax burden from your shoulders. You may not get very high returns from these tax-free investments, but they provide you the safest way of capital preservation. Various government or municipal bonds are in the highest demands in the category of such tax-friendly investments. The persons under higher income brackets must consider these types of investments to gain substantial tax benefits.

Are you a parent with children below the age of seventeen? Then never forget to avail the opportunities of tax credits. You are entitled to get a 700 tax credit for each child under the age of 17. Depending on your situation you can avail various other credits like Lifetime Learning Credit. Tax credit is also available when you adopt a child.

Another way of saving on taxes is to take the full advantage of tax deductions. There are number of items, on which you can get your taxes deducted. But in most of the cases, people fail to see beyond certain standard deductions and miss out on a range of other available reductions.

You will be able to locate many more deductions beyond the standard ones, if you search for them wisely. The idea of tax deduction is founded on two basic themes. Primarily, taxes are deducted from the expenses of necessary areas of life like medical expenses, buying a home, starting a family, education and charity. Secondly, taxes are deducted from reasonable expenses falling under deductible categories.

Take an example of medical deductions. You will get deduction on the expenses amounting to 7.5 percent of your adjusted gross income (AGI). In addition to physicians and dentists, you are entitled to get tax deductions on the other medical-related expenses that are not covered by health insurance plans. For example, you get deductions on the expenses incurred on your glasses, contact lenses, braces, false teeth and travel to and from medical treatments, medical supplies and laser surgery.

You are also entitled to get tax deduction for the purchase of uniforms or job-specific clothing and accessories. Taxes are also deducted from business travel expenses and work-related relocation costs also involve tax deductions.

Have you just bought a home? You must know that mortgage interest payments are deductible. In case your mortgage interest happens to be higher than your standard deduction, take advantage of the greater deduction by itemizing the mortgage interest.

In case you are planning to seek tax deductions for charitable donations, preserve the receipt. In case the donation is in the form of services or goods, then also you can ask for the deduction; only if is to be supported by receipts or statements of the value of goods or services.

 If you are among those people who think about clearing the tax bills when the year end is approaching, you must realize the fact that tax savings is a year long process. It requires a good amount of research too. What you need to do is make some intelligent savings all through the year to escape the reach of the income tax bite. There are other ways also to keep your tax bite at a minimum.

The tax free investments are the best way of reducing the tax burden from your shoulders. You may not get very high returns from these tax-free investments, but they provide you the safest way of capital preservation. Various government or municipal bonds are in the highest demands in the category of such tax-friendly investments. The persons under higher income brackets must consider these types of investments to gain substantial tax benefits.

Are you a parent with children below the age of seventeen? Then never forget to avail the opportunities of tax credits. You are entitled to get a 700 tax credit for each child under the age of 17. Depending on your situation you can avail various other credits like Lifetime Learning Credit. Tax credit is also available when you adopt a child.

Another way of saving on taxes is to take the full advantage of tax deductions. There are number of items, on which you can get your taxes deducted. But in most of the cases, people fail to see beyond certain standard deductions and miss out on a range of other available reductions.

You will be able to locate many more deductions beyond the standard ones, if you search for them wisely. The idea of tax deduction is founded on two basic themes. Primarily, taxes are deducted from the expenses of necessary areas of life like medical expenses, buying a home, starting a family, education and charity. Secondly, taxes are deducted from reasonable expenses falling under deductible categories.

Take an example of medical deductions. You will get deduction on the expenses amounting to 7.5 percent of your adjusted gross income (AGI). In addition to physicians and dentists, you are entitled to get tax deductions on the other medical-related expenses that are not covered by health insurance plans. For example, you get deductions on the expenses incurred on your glasses, contact lenses, braces, false teeth and travel to and from medical treatments, medical supplies and laser surgery.

You are also entitled to get tax deduction for the purchase of uniforms or job-specific clothing and accessories. Taxes are also deducted from business travel expenses and work-related relocation costs also involve tax deductions.

Have you just bought a home? You must know that mortgage interest payments are deductible. In case your mortgage interest happens to be higher than your standard deduction, take advantage of the greater deduction by itemizing the mortgage interest.

In case you are planning to seek tax deductions for charitable donations, preserve the receipt. In case the donation is in the form of services or goods, then also you can ask for the deduction; only if is to be supported by receipts or statements of the value of goods or services.