Why is tax planning so important

1
Why is tax planning so important?
2
Why is tax planning so important? To keep
from paying more than you need to and pay only
your fair share
3
Name and explain the four general categories that
give tax relief, or reduce taxable income,
therefore reducing tax liability.
4

• Name and explain the four general categories that
  give tax relief, or reduce taxable income,
  therefore reducing tax liability.
• Adjustments to income
• allow certain legal reductions in gross income.
• Examples include IRA contributions, moving
  expenses, self-employment tax and retirement
  plans, and alimony payments.
• Itemized deductions
• consist of medical and dental expenses, state,
  local, and real estate taxes, home mortgage and
  investment interest payments, gifts to charity,
  theft and casualty losses, and miscellaneous
  deductions.

5

• Name and explain the four general categories that
  give tax relief, or reduce taxable income,
  therefore reducing tax liability.
• Personal and dependency exemptions
• serve to further reduce taxable income.
• Credits
• are subtracted directly from the tax liability
• Examples of credits include child and dependent
  care expenses, hope scholarship credit, lifetime
  learning credit, child credit, and the earned
  income credit.

6
Explain how to calculate taxable income, and the
associated need for a payment or refund.
7

• Explain how to calculate taxable income, and the
  associated need for a payment or refund.
• calculate total gross income
• by adding income from all taxable sources.
• subtract all adjustments, deductions (the
  itemized or standard amount), and exemptions
• to calculate taxable income.
• apply credits and tax payments
• to determine if a payment or refund is due.

8
Name the categories of filing status.
9

• Name the categories of filing status.
• Single status
• Married filing jointly or surviving spouse
• Married filing separately
• Head of household.

10
Name the sources of tax-free income.
11

• Name the sources of tax-free income.
• interest on municipal bonds
• tax-free money market funds
• gifts
• child support payments
• welfare benefits
• workers' compensation benefits
• veterans' benefits
• federal income tax refunds
• certain Social Security benefits
• interest earned inside a life insurance policy
• earnings on an IRA
• inheritances.

12
What are the five general tax strategies in tax
planning?
13

• What are the five general tax strategies in tax
  planning?
• Maximize your deductions
• Look to capital gains and dividend income,
  especially if you are in the top tax bracket
• Shift income to family members in lower tax
  brackets
• Seek out tax-exempt income
• Defer taxes to the future.