April 15th is fast approaching! If you haven’t done your taxes yet, it’s time to get into gear. Is the idea of slaving over your w2 and trying to figure out how to get the most out of your deductions making you feel queasy already? Don’t sweat it! You can now electronically file your taxes from the comfort of your own home. Tax software can help you itemize the proper deductions for every type of situation. Got a big family? Own your own home? Run your own small business? No problem. Check out our helpful guide to choosing the best tax preparation software for your situation.
As April 15th draws closer, we all realize that Tax Day is almost upon us. It is time to file in your tax returns! As the day draws closer, we look for ways to cut our tax bill. There are a few simple guidelines for saving tax. For instance, you should make full use of tax allowances in a marriage. You can do this by ensuring that income is equalized as far as possible. Distributed income can ensure that you do not exceed the upper brackets of tax slabs. The diamond solitaire ring on your spouse’s finger could symbolize a bit of a tax break!
An innovative tax savings idea is to purchase new equipment. Most business equipment is depreciated over a period of 5 or 7 years. That means you can depreciate only 20% or 14.29% of the value. However, the Section 179 deduction permits an immediate write-off for up to $250,000 as long as you use the equipment before the year ends. Here, there is no carry-over into next year.
Another great tax savings plan would be to establish a retirement plan. If you do not have a retirement plan, then do make sure to set up one of these tax savings plan. The government encourages savings and the more you save, the lesser tax you pay.
Another great tax saving method is to make full use of Government sponsored tax breaks on savings. This refers to pensions, tax exempt Individual Savings Accounts, Venture Capital Trusts, and Enterprise Investment Schemes etc. Pensions are simple and easy to setup. You can save money with 40% tax relief today and pay tax on those savings at basic rate in the future. Meanwhile the money you save in tax can be invested to grow further for you. ISAs are also very simple and they are good for higher rate taxpayers. EIS and VCT are more complicated but they offer valuable savings for the smart investor.
do make sure that your business structure is right. The current tax system favors companies for trading and personal ownership for assets. However there are certain exceptions. Get the right advice and get the combination right. You will have the benefit of lower corporate tax rates and you might even gain attractions like NI savings and business asset taper relief cut in.
A useful tax suggestion would be to make use of the generous relief available against Capital Gains Tax on business assets. Capital gains on business assets are subject to a very low tax rate and following repeated changes in the rules now almost all commercial property counts as a business asset, even if you do not occupy it for your business. However do not mix investments and trading in a company. It may compromise the business asset status of your shares.