Planning for Your Individual Taxes

Two things are certain in life: death and taxes. If you’re self-employed or you pay taxes each year, understanding how to plan for that tax burden is essential to your financial wellbeing. After all, nobody wants to be hit with a large and unexpected tax bill at the end of the year. Fortunately, you can avoid this with some simple planning.

Here’s what we recommend for our clients:

Begin With Understanding Your Tax Bracket

You can’t plan for your individual taxes unless you understand your tax bracket. If you’re not sure what federal tax bracket you’re in, here are a few things to know:

• The United States utilizes a progressive tax system. Under this program, people with higher taxable incomes pay higher tax rates. People with lower taxable incomes, meanwhile, pay less in taxes
• Today, there are seven federal income tax brackets, they are 10%, 12%, 22%, 24%, 32%, 35%, and 37%
• Regardless of which tax bracket you're in, you probably won’t have to pay that rate on all of your income. That’s because:
• You can subtract tax deductions from your taxable income
• The government divides taxable income into segments and taxes each segment according to its corresponding rate

If this all sounds complex, you’re not wrong. Fortunately, our team will work with you to ensure you’re getting the tax advice you need to thrive this tax season.

Tax Deductions vs. Tax Credits

While the names sound similar, tax deductions and tax credits are not the same things. Tax deductions or expenses you’ve incurred throughout the year, which you can then subtract from your taxable income. Think of business travel expenses, for example. Tax credits, meanwhile, are a dollar-for-dollar reduction in your tax bills. A tax credit that is valued at $3,000, for example, will lower your tax bill by $3,000.

Understanding how to Lower Your Tax Bill

Lowering your tax bill doesn’t have to be complicated or illegal. In fact, our team is here to help you take the necessary steps to decrease your tax liability and streamline your tax season each year. Whether you’re interested in sheltering income or reducing your tax liability, our team is here to help. 

Remember: the tax system is complex, and it’s not meant for everyone to understand. That’s why it's so critical to work with a skilled and seasoned tax expert. Give us a call today to learn more or to begin your tax assessment and planning session. We’ll help you learn how to flex your tax liability and make more money in your pocket, without putting yourself at excessive risk of an audit or similar situation.