Tax Basics, Tax Planning, Tax, Tax help, Capital gains tax, Save Tax, Help Parents and Save Tax   Tax Basics, Tax Planning, Tax, Tax help, Capital gains tax, Save Tax, Help Parents and Save Tax 
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Tax Basics

Home > Tax Planning > Tax Basics

Tax Basics, Tax Planning, Tax, Tax help, Capital gains tax, Save Tax, Help Parents and Save Tax
Sheltering your money from the tax people involves tax planning
There's a famous quotation about taxes you may have heard. It goes like this:

"When there is an income tax, the just man will pay more and the unjust less on the same amount of income."

The author was Plato — and he wrote it 2,500 years ago. The quotation reveals a fundamental fact of life: Taxes have been with us for quite some time — and they're going to remain with us for the foreseeable future. Simply put, no world depression, no natural calamity, no taxpayer revolt will keep the tax collector from your door.

So, in a sense, you may as well resign yourself to paying taxes. But, in another sense, you should make every effort to prove Plato wrong in his opinion of the man who pays less than his share. Through a knowledge of the tax laws and a rearrangement of your financial affairs, you can reduce the tax bite — and still qualify as a just and fair individual.

A common mistake many people make is assuming that tax shelters help only those who are already rich. The truth is, there are many more tax shelters available than most people realize — and the majority can be of great benefit to persons of even modest means. They may not be exotic or glamorous but they are more than worthwhile.

Some are so commonplace you probably never think of them as being tax shelters. These include such familiar items as U.S. Savings Bonds, individual retirement accounts, or even your own home. It would be virtually impossible to find a single taxpayer who could not benefit from using one or more of the shelters that will be described here.

But is it really worth all the trouble when you take into consideration the new low tax rates you may ask. Why not pay the taxes and avoid all the red tape? Consider the following: If you can reduce your taxes by just $1,000 each year over the next 30 years, the additional wealth you will have accumulated will total $165,000 — assuming you can earn a re­turn of 10 percent on the money you save each year. If you can accumulate that kind of wealth saving just $1,000 on your taxes, think how much you will accumulate if you can save $5,000, $10,000 or even more each year. You could be talking about millions of dollars.

Some people have the notion there's something sinister or dishonest about tax shelters, that they are shady devices for "putting one over" on the tax people. We want to dis­pel that notion right here.

Rest assured, all of the tax strategies we suggest are legal — and ethical. Each is based on the law or established legal precedent over the years.

The only cheating involved will occur if you fail to use the available shelters to the fullest extent possible: You'll be cheating yourself out of dollars that are rightfully yours.

But, you may ask, if tax shelters are legal, ethical and profitable, why aren't they used more often?

Part of the answer is that they are. Most people have taken advantage of tax shelters at some time, though they may not think of them as such if they are, for example, U.S. Savings Bonds. However, it is true that tax shelters aren't used as extensively as they might be, for two reasons. One is that many people are unaware of the tax shelters available to them under the law. The other is that some people just don't bother, assuming that they are too complex and aren't worth figuring out, especially if the potential savings seem small.

In some instances, they might be right. Some tax shelters are extremely complex, but many others can be easily under­stood and applied by nearly anyone.

You should abandoned notions you might have had that tax shelters are merely the playthings of millionaires.

There are two approaches to tax savings. The goal of all tax shelters is to enable you to keep more of what you earn. That goal can be accomplished in one of two ways:

1. By eliminating the tax.

2. By deferring the tax.

You have no doubt heard Benjamin Franklin's observation that "In this world there is nothing certain but death and tax­es." But are taxes a certainty with every type of income you can earn? Not at all.


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