Three Important Elements A Tax Planner Can Help You To Understand
Posted on: 26 December 2019
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It is recommended that most people meet with a tax planner when they start a new job, buy a new home, have their first child or make other changes to their life. This is because there is a lot of key information that most people do not fully understand. These important elements can cause you to make a mistake on your taxes or not to fully understand how to do your taxes. Here are three important elements that a tax planner can help you to understand.
What Tax Bracket You Fall Into
One of the things that tax planning can help you to understand is what tax bracket you fall into. The tax bracket that you fall into affects how much you are taxed. There are changes that you can make that can affect what tax bracket you fall into. Understanding where you are now and what rate you are taxed at, and what changes you can make to possibly fall into a different bracket, can help you to see the value of making these potential changes. Understanding your tax bracket also helps you to understand what bracket you may fall into if you change to a one-income household or you or your partner get a raise.
The Differences Between Tax Deductions and Tax Credits
Many people use the terms tax deductions and tax credits interchangeably, but they are two separate terms. A tax deduction decreases your taxable income, while a tax credit is applied directly to your calculated tax amount. A professional can help you to better understand the difference between these two terms and how they impact your taxes.
Whether a Standardized Deduction or Itemizing is Best for You
Finally, a professional can take a look at your taxes and help you to determine if taking a standardized deduction or itemizing is right for you. Itemizing is more complex, but, for some people, is the better option. For other people, taking a standardized deduction is the right choice. Selecting the wrong option for you can result in you owing more taxes, so having a professional help guide you is advised.
Many people think that tax planning is the same as tax preparation, but it is not. Tax planning helps you to better understand how tax preparation is done, and what changes you can make to better your position when it is time to file your taxes. Consult with a tax planning professional today to learn more about how they can help you with your taxes both this year and in future years.