As you complete and file your 2019 taxes you may be discouraged thinking that you wish you would not have had to pay so much in taxes this year. You may be wondering if there is anything that you can do differently to make your 2020 tax filing turn out more favorably. If this describes how you are currently feeling, you are the perfect person to have Mark Dicus & Company do some tax planning with you. If you do not even know what tax planning is or why it is important keep reading.
Features of Tax Planning
An excellent definition of tax planning comes from Investopedia. They define tax planning as “the analysis of a financial situation or plan from a tax perspective. The purpose of tax planning is to ensure tax efficiency…Reduction of tax liability and maximizing the ability to contribute to retirement plans are crucial for success.” Mark Dicus & Company firmly believes that some level of tax planning should be done by every single person. How much time this tax planning takes will depend on the individual.
Understand Tax Brackets
When you begin tax planning the first thing that you will need to do is understand the tax brackets. The United States has a progressive tax system. In a nutshell, this means that the more money you make the higher your tax rate is. There are seven federal income tax brackets. The good news is that you can subtract tax deductions to determine your taxable income. There are also tax credits to take advantage of.
List of Tax Deduction & Credits
Many people do not fully understand what tax deductions and tax credits are. They know they are a positive thing but do not always completely understand why. Tax deductions are specific expenses that you had throughout the year that you can subtract from your taxable income. This lowers the amount of your income that you will be taxed on. Tax credits are when the government gives you a dollar-for-dollar reduction in your tax bill. There are multiple ways that you can earn tax deductions and tax credits. As we help our clients with tax planning we frequently find that they are eligible for some tax deductions and tax credits by making a few simple changes. We can help you see what you are currently missing out on because you did not fully understand all of the tax codes.
Retirement Tax Planning
Another part of the tax planning deals with your retirement plans. People across the world save for retirement through a retirement plan. You may have an IRA or 401(k) plan that you are contributing to as part of your retirement preparation. As you make contributions to your retirement it reduces your adjusted gross income. Mark Dicus & Company can help you know how to best prepare your finances and your taxes for retirement.
Tax Planning Strategies & More in & Everett, Bellevue, Kirkland, Renton, Kent, Tacoma & Seattle, Washington
There are different areas that we will also cover when we work on a tax plan with our clients, but these are the main ones that people ask us about. Put your mind at ease and schedule an appointment for a tax planning session with Mark Dicus & Company today.