A tax refund is always a pleasant surprise. You can pay off debts, make a large purchase, or go on a family vacation. Whatever you choose to do with your tax refund is up to you. Here are some strategies to assist you in reducing your income tax.
Keep good records of your taxes:
Don’t try and make an estimated guess of what is and what isn’t tax deductable, keep receipts of everything. Thousands of people miss out on certain deductions because they threw receipts away. Keeping good records is the best way to ensure that you claim all that you are entitled to.
The majority of people are not aware of this; however, every donation made to a registered charity that exceeds $2 is tax deductible. Once you have made your donation, make sure that you get a receipt and add it your records.
Claim what belongs to you:
There are so many things that are tax deductible that people are not aware of. Even if you make a purchase that is for both for work and personal use, you can still claim for the portion that you use for work. Again, keep all of your receipts so that you won’t miss out when you file your taxes.
Get advice from a tax professional:
You will have to pay a fee for professional advice; however, a good tax professional is going to be up to date on all the latest tax legislations. They will know exactly what you can and cannot claim and they will make sure that all mistakes are effectively rectified to ensure that you are not penalised by the ATO.
Depending on your financial circumstances, making investments can assist in considerable tax reductions. However, prior to making an investment make sure that you get the right financial advice because if you want to save on your taxes, you will need to ensure that you make a good investment and not one where you will lose instead of gain money. Discussing possible investments with a financial planner or tax professional is a good idea.
Control the timing of your expenses:
You can choose the year in which you make a considerable tax deductible expense if you know in advance that you need to make the purchase. For example, if you have a large tax deductible expense, and your income for that year will take you up to the following tax threshold, it would be best that you purchase what you need just prior to the end of the tax year. This will reduce your taxable income for the year, and in some instances, take you into a lower tax bracket. It’s worth talking to a tax professional about this.
We’d love to hear about your tax strategies in our comments section.