Tax Saving Strategies and Maximizing After-Tax Income

You cannot avoid taxes. Not only are taxes your responsibility, but ignoring your tax liabilities can lead to harsh consequences that can ruin your reputation, deepen your debt, land you in jail, and result in asset and business loss. However, there are ways that you can reduce taxes on your income legally. These strategies aren’t ways to trick the IRS but rather ways to take advantage of allowable deductions. And when you use clever ways to reduce taxable income, it means you have more after-tax income. Here are ways to minimize the taxes you pay: 

Buy a municipal bond 

Investing in municipal bonds provides higher after-tax returns because they are considered fixed-income investments. Interest-bearing debt obligations designed to fund public works, such as roads and bridges, and support the government are generally exempt from federal taxes. And depending on the specific municipal issue, it may also be exempt from state and local taxes. The major types of municipal bonds include general obligation bonds, revenue bonds, commercial paper, and private activity bonds. 

Start a business for profit 

Self-employed taxpayers and business owners enjoy many tax deduction benefits. Any expenses related to the daily operations of your business can be deducted from taxable income, which reduces your total tax liability. And if you choose to start a home-based business, not only can you reduce your taxes, but you will also keep overhead expenses to a minimum. 

Know which tax credits you are qualified for 

The IRS provides many tax credits to help people lower their taxes. The problem is that many people don’t claim them or are not aware that they qualify. There are three types of tax credits: nonrefundable, refundable, and partially refundable. The following are some of the top tax credits that you should be aware of and claim if you qualify: 

  • Advanced Premium tax credit 
  • Retirement Savings Contributions (Saver’s credit) 
  • Earned income tax credit 
  • American Opportunity tax credit (AOTC) 
  • Credit for the Elderly or the Disabled 
  • Lifetime Learning credit 
  • Child and dependent care credit 
  • Child tax credit 
  • Adoption credit 
  • Making the Most of Your After-Tax Income 
  • Energy tax credits 

Maximizing After-Tax Income 

After-tax income is what you’re left to consume or invest after federal, state, and withholding have been applied. To calculate your after-tax income, subtract deductions from your gross income. Computing after-tax income is relatively the same for businesses; the difference is that a company would determine total revenues instead of gross income. To arrive at taxable income, the business would subtract their expenses and deductions from their total revenues. Therefore, the after-tax income is what is left after income tax has been paid. 

As your disposable income, there are countless ways that you can put the money to good use. The best place to learn about tax strategies is from a tax expert, who will not only ensure that your after-tax income has been calculated correctly but used in a way that maintains your financial health. 

Planning is the key to successfully and legally reducing your tax liability. At Golden Tax Relief, we go beyond tax compliance and proactively recommend tax- saving strategies to maximize your after-tax income. Click here to request a consultation or call 844 229 8936. 

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