Taking control of your taxes topic #69 - JOB... | Gather

by Jeff S.

Member since:
August 16, 2008

Unemployment and Income Tax Savings

4 Keys to Reducing Your Income Tax

One of the most important idea in reducing income tax is to know what changes are taking place in tax?legislation. ?I know the subject matter is confusing, but you can easily find the latest tax change information at the IRS. ?Link to Tax Law Changes for 2011 Federal Tax Returns to find a short list of tax changes. ?In addition, read the next 10 posts to find some gems of information to see more tax refund next year.

There are very few things you can do to increase your tax refund this year (contribute to IRA or HSA), but you CAN effect BIG changes for 2012 tax year. ?The basic principles include:

• Budget/plan/implement/review tax quarterly
• Reduce your Effective Tax Rate
  • Reduce adjusted gross income (AGI)
  • Increase deduction (if above standard deduction)
  • Increase tax credit and tax advantaged accounts
  • Use deduction lumping technique
• Timing of tax-related action is often crucial

But before any of this can be started, you should have your financial ducks in a row. Review these important personal finance concepts:

• Spend less than you earn
• Have an emergency fund ready (perhaps your tax refund can be a rainy day fund)
• Strive to create no new debt, and eliminate old debts (will take 12 to 24 months)
• Save up for retirement and college funds (after consumer debts are paid off)
• Pay off mortgage (may take 6 to 7 years)

Next post will discuss Tax Planning Strategies

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