The Benefits of Filing the Right Tax Info
Author: Ron Finkelstein Article source: http://www.articledeshboard.com/. Used with author's permission.
Most people hate tax time each year. They feel that they are over-taxed on their paychecks each week with items such as federal, state, Social Security and Medicare taxes. When tax-filing time comes they feel totally overwhelmed and a lot of people face paying taxes that are a heavy load to carry. No wonder many people are depressed thinking about filing their taxes.
It is certainly possible to combat the depressing season of tax time. You may find it helpful to remember that there are a number of tax deductions for which you may qualify based on tax regulations. These deductions prevent you from having to pay tax on specific economic benefits. Additionally, they may enable you to deduct certain income expenditures, or even directly from the cost of your tax bill.
Tax Credits and Tax Deductions
There are currently five tax areas where tax deductions and credits can be taken and receive special treatment under the US tax laws:
1. Tax exclusions or tax exemptions are examples of tax-free income, which is obtained without any tax concern. Often, tax-free income need not be reported to the IRS.
2. Capital gains are profits you get from selling or exchanging property that has been held for at least a year or more. These capital gains, which are considered long term, will be subject to reduced tax rates, in comparison with taxes for other types of income, like salary or income from interest. Regular stock dividends, as well as stock mutual funds, get taxed with the same lower rates as capital gains.
3. Tax-deferred income is money that's not currently taxed. Because income grows without a reduction for the current tax, you might accumulate a bigger amount as time passes. That being said, at some point, your income will become taxable.
4. You can subtract tax deductions from you income, reducing the amount of your taxable income. The first deduction class is called "above the line" deductions. These are subtracted directly from your gross income and can only be claimed if you are filing an itemized return and not taking the standard deduction, which will be explained shortly.
5. Tax credits are used to offset taxes owed, usually in a dollar-for-dollar exchange. There are usually separate forms that need to be filled out when claiming tax credits.
These ways of taking care of your taxes are easy, and will reduce your income tax liability.
Learn How to Deduct Mileage for Commuting and other hidden Tax Credits that can save you tons of money.
Ron Finkelstein is NOT a Tax Attorney or an accountant. He is merely a small business owner who has paid a lot of money over the years to learn a whole lot about Taxes and Time Management. Read more of his Tax Articles at Free-Reprint-Articles.com
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