There are tax strategies which you can use to reduce your tax liability. There are tax advisors and attorneys who are experts on tax strategies. If you consult them they will advise you what you will do to minimize your tax liability.
There are investments which will give you tax advantages greater than others. When planning your portfolio you should increase you tax-exempt investments. Municipal bonds are usually exempted from tax. This is a great advantage for those who have bought municipal bonds and it is one of the tax strategies which you can utilize.
Tax Strategies are important because they utilize legal ways in which tax can be avoided without committing a crime. Mortgage loan repayments are tax deductible and you can deduct the amount from taxable income. Savings in 529 Plans have many tax advantages but they are different for each state. It is important to check which savings plans would be best for your financial needs.
Many business costs and expenses are tax deductible if the cost or expense was incurred to generate the business income. These include rent, salaries, transport, electricity etc. provided they contributed towards earning that business income.
Estate taxes can be reduced by transferring the assets to a Living Trust. When you make gifts to your beneficiaries you reduce the assets in your estate. The federal estate tax will be calculated based on the assets remaining. The gifts will not be charged tax. An alternative is to take a unified tax credit.
Capital gains are realized when a capital asset is sold at a profit. These are bonds, options, stocks and other securities. When the capital asset is sold at a loss then a capital loss is incurred. You can reduce your tax liability by selling a capital asset and offsetting the capital gain against a capital loss. This eliminates or reduces the capital gain subject to tax. The capital gains can be deferred to the future if you expect the tax bracket to go down but if you expect it to go up it is better to recognize the gain in the current year. When an individual sells a home he can deduct USD 250,000 from capital gains as an individual and USD 500,000 if it is a married couple.
You should learn various tax strategies which will reduce tax liability on your Retirement IRA Plans, annuities, pensions 401(k), Roth Plans and other plans. When your employer makes contributions to Individual Retirement Account Plan IRA, the contribution is not taxed until the time of withdrawal. The tax is deferred to a future date. Your employer is allowed to make a tax deduction for the amount contributed as an incentive to save in retirement plans. Contributions to Roth Plans are taxed but when the amount contributed is withdrawn there is no tax charged.
The proceeds of life insurance are exempt from income tax. The beneficiaries may use these proceeds to pay other estate taxes which will reduce their tax liability.