Of Taxes And Personal Finances: Planning Them Jointly

Your taxes and your finances should be planned hand in hand. Strategic tax planning is a critical component of personal wealth management and if properly executed, can lead to the achievement of financial goals.

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Tax planning is much more than just keeping track of income and expenses. Rather, it is the practice of deferring and avoiding taxes through legal strategies. These include taking advantage of beneficial tax-law provisions, increasing and accelerating tax deductions and tax credits, and maximizing applicable breaks under the Internal Revenue Code.

Paying taxes is one of life’s largest obligations. The amount deducted from your monthly paycheck might not be too significant but all these withheld taxes add up to hundreds of thousands of dollars. This is why it is critical to align one’s financial goals with efficient tax planning. Employing effective tax planning strategies will make room for more money to save, invest, or spend.

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Tax planning is one of the keys in achieving financial stability. When setting financial goals, it is important to always plan with taxes in mind to gain a more accurate picture of your financial situation and to ensure that your money is spent well.

Anthony Laxen is a tax manager and certified public accountant based in Minnesota. He specializes in tax planning and compliance and business consulting in industries such as service, real estate, manufacturing, and wholesale and distribution industries. Visit this blog to learn more about taxes.

Taking Advantage Of Education Tax Credits

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Higher education can be costly and difficult to afford, which is why opportunities to reduce expenses should be grabbed and explored. There are three ways that taxpayers can take advantage of to help with the education expenses; namely tax credits, deductions, and savings plans.

A tax credit lessens the income tax one has to pay. A deduction reduces the amount of income that is subject to tax, subsequently reducing the tax needed to be paid. Savings plans generally accumulate regular deposits and earnings, growing tax-free until the money is withdrawn to enroll the student. While all of these have pros and cons, below are the tax credits taxpayers can use for their dependent or even for themselves.

To be able to claim an education tax credit, the student, who is the taxpayer himself or a dependent, pays qualified education expenses for higher education. He also must be an eligible student enrolled at an accredited or recognized educational institution. The eligible student must also be listed on the filed tax return.  

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The American Opportunity Credit provides a maximum annual credit of $2,500 for each eligible student. If the credit amount is greater than the amount of taxes owed, up to $1,000 of refund can be claimed.

The Lifetime Learning Credit meanwhile can provide an amount of up to $2,000 per tax return. Those who enroll in undergraduate, graduate and professional degree courses are eligible to claim this credit.

With education tax credits available, higher education should not have to be as burdensome as it was before. The pursuit of knowledge has definitely become more bearable.

Anthony Laxen is a tax manager and shareholder at Weber & Deegan, Ltd. To learn more about tax management, subscribe to this Twitter feed.