In this economy, even the richest of us are on the lookout for new and unique ways to save a buck or two. The basic tax planning strategy goes like this: reduce your taxable income, shift taxable income into nontaxable income, take advantage of tax credits, and pay the right amount of estimated taxes.
Being self-employed is quite possibly one of the best tax strategies available today. Other good tax strategies include being a landlord and being an investor. All three strategies have one thing in common: you are in full control of your tax situation, and you can reduce current income by any losses you have from freelancing, renting out property, or investing.
Taxpayers who invest in stocks, bonds, mutual funds, or real estate can benefit from the lower tax rate on long-term gains. Homeowners in particular can exclude up to half a million dollars in profits when they sell their primary residence. By shifting investment income to long-term gain, you can lower your taxes significantly.
You can avoid owing at the end of the year by increasing your withholding. More money will be taken out of your paycheck throughout the year, but you will get bigger refund when you file your taxes. Also contribute to your pension plan when ever possible as this will have a big impact on any taxes possibly owing.
Understand the difference in tax credits and tax deductions.
The list of possible Business Tax Credits examples:
In conclusion, tax credits and tax deductions are both of benefit to
small business owners, because they reduce the taxable income of the
business, but tax credits are a little better, because they are a direct
"dollar for dollar" reduction.
Tax Prep Savings (USA)
Tax advice for new Canadians