Show me where you spend your money and I'll tell you what they are.
-James W. Frick
Plan YOUR work! Work YOUR Plan!
Wednesday, June 20, 2012
FEED TWO BIRDS WITH ONE SEED
Personal Finance 4 The People is pleased to team with others who are able to share their expertise in various areas. We hope to combine our efforts to bring a greater financial effort in order to help you reach YOUR Financial Independence. Today's guest post comes to us from J. S. Aikens.
I’m sure you all have heard and used the phrase “kill two birds with one stone”.I have a friend who felt that idea was too violent, so she replaced it with “feed two birds with one seed”.You can apply this idea to your tax bill.
Most of us don’t give much thought to taxes until tax season.In doing this, we could be cheating ourselves out of the opportunity to keep more of our money.Do I have your attention?Understanding how to use tax credits and tax deductions can make quite the difference in the amount you owe at the end of the year.
The term “tax deduction” is widely used but sometimes not fully understood.A tax deduction is based on the rate you are taxed.For example, let’s say that you are in a 25% tax bracket.If you have a $1,000 tax deduction your savings is based on this rate. Your savings on the $1,000 deduction would be $250.00.
A tax credit is a dollar for dollar savings.If you are entitled to a $1,000 tax credit you will save $1000 on your tax bill.You have “fed two birds with one seed”.Some tax credits are standard and available from year to year, while others are temporary.Make the time every now and then to use the internet and search for new tax credits, especially if you are making a large purchase or repair to your home. Save all your receipts for major purchases. Don’t be timid about asking questions. You have the power to change your financial situation by keeping more of the money you make.