Uncle Sam

18 Nov, 2004 in art pottery by admin

Uncle Sam

Tax Planning - Pay Only What is Due to Uncle Sam

"In this world, nothing is certain but death and taxes", wrote Benjamin Fanklin in 1789. If we taking care of our health and be safety conscious, we may be able to outwit death until we are Very Old. But for taxes, you can't escape from paying tax since you start your first job, unless you are very poor. Hence, as a taxpayer, you need to have a good tax planning so that you can legally minimize your tax consequences and pay only what is due to Uncle Sam, not more!

Understanding Your Tax Bracket

The more money you make, the more you pay in taxes. Your tax brackets increase as your income increase. In additional, you loss some of you tax advantages, such as exemptions of dependents, that are phased out as your income increase.

Beside the federal government tax which is unable to be escaped for all taxpayers, if you live in state that also taxes you income, you need to pay for state government tax if applicable. There are seven tax-free states in United States: Alaska, Florida, Nevada, South Dakota, Washington and Wyoming. Hence, you should aware and plan in the additional tax rate if you are living at taxable state. For example if you are in the 25% tax bracket for federal taxes and you live in state that has a 5% income tax, you total tax rate should be 30%. Thus, for every $1,000 you earn, Uncle Sam has his share of $300 living you $700 to spend.

The dollar amount at which tax brackets occur change every year because of factoring in the inflation which vary from year to year. Hence, you should get the most current tax schedule and use it in your tax planning.

How To Legally Pay Less Tax?

There are many tax exemption and deductions benefits offer to taxpayers. You need to know the benefits that apply to you so that you can get some "discount" from Uncle Sam and pay less legally. The deductions and exemptions if you are eligible will help you to reduce your taxable income. Hence, you should get a good tax planning guide which will help you to understand what are the tax's benefits apply to you.

While a tax deduction is something you subtract from your gross income to reduce your taxable income, tax credit is another tax benefits that you can utilize to minimize you payable tax. Tax credits are actually worth more to you than a deduction. It reduces the amount of taxes you owe, dollar for dollar. Thus, you better get to know the tax credits that can apply to you. Among the tax credits for you to calculate in, if applicable are:

1. Dependent & Childcare Credit

The dependent and childcare credit is available if you work outside your home or are full-time student. The expenses must be for dependents under age 13 or any person who is mentally incapable of care for themselves and they must be qualified as your dependent.

2. Child Tax Credit

If you enjoy this benefit if you have children being supported by if they are under age 17.

3. Education Credits

There are two types of education credits, the Hope Scholarship credit and Lifetime Learning credit. The Hope Scholarship credit is available for the first two years of college of you kids. The Lifetime Learning credit is not just for kids, you can utilize this benefit if you need to take courses to improve your job skills.

4. Adoption Credit

The adoption credit is based on the cost of adoption a child. These costs include reasonable adoption fees, court costs, attorney fees, and legal fees.

5. Earned-Income Credit

The earned-income credit is the only credit given as a payment. The credit is applicable for low-income families, usually with children.

In Summary

You can not escape from paying tax; this is the price of living in a civilized nation. But you can learn more in tax planning so that you can pay less, legally. Uncle Sam will let you living in peace if you just pay what is due to him and you no need to pay more to make him happy.

About the Author

Cornie Herring is the Author from http://www.StudyKiosk.com. An informational website on credit basics, tax planning, debt consolidation & bankruptcy. Learn more about money from our Money Lessons.

What percentage does uncle sam take from inheritance money?

I am wondering if you anyone can tell me what percentage the government takes from inheritance money?
Ok lets say it is less than $500,000 but more than $400,000
I guess I should have mentioned my late great uncle lived in Mylasia, so it is not in any state..

i the deceased has claimed the exemption for you, there is no tax on the first million

Uncle Sam - I Don't Ever Want TO See You Again