Paying taxes consumes a good amount of one’s savings. For anyone enjoying financial success, their taxes will be a significant expense. This is true when the person is not aware of the benefits of tax planning. However, systemic tax planning will help you to save a good amount of money in the long run.
Tax planning comprises several steps meant to decrease tax payments and liabilities. Taxes are difficult to avoid, but it is possible to save a significant amount of money with some careful tax planning and effort.
In this blog, we have mentioned some helpful tips for phoenix tax planning to decrease your burden.
- Buying/investing in municipal bonds
Buying or investing in municipal bonds means lending money to a state or local government organization for a set number of interest payments over a fixed period. Once the invested bond reaches its maturity date, the investment’s total amount is refunded to the buyer. The tax-free interest of municipal bonds attracts investors to invest in them.
- Aim for long-term capital gains
Investing is an essential tool to grow your wealth. Additional tax benefits from investing in stocks, mutual funds, or real estate are favorable tax treatment for long-term capital gains. Suppose an investor holds a capital asset for a longer period. In that case, they will enjoy a preferential tax rate of 0%, 15%, or 20% on the total capital gain, depending on the investor’s income level.
- Split, mix and match your accounts.
If you take your time and create different accounts, it will help you diversify your taxes. It does not matter whether they are retirement saving plans or brokerage account. Splitting your contributions among various types of accounts will give you space to identify how your future taxes will be and how to deal with them.
- Invest and start a business setup
You can create an additional income by setting up a business because a side business offers many tax advantages. In businesses, expenses are deducted from total income, which reduces the total tax obligations. A business owner can deduct some of their home expenses with a home office deduction. One can also remove a portion of the utilities and internet users in the business from their income.
- Using your health savings account (HSA)
If you have a high-deductible health insurance plan, you can use a health savings account to reduce taxes. Even if you pay for qualified medical expenses, the withdrawals are not taxed, which is an extra benefit.
A tax planning consultant can help you lower your tax liability to pay fewer taxes and have more money yearly to save or invest.
