(c) Identify 10 wealth planning strategies for tax purposes (tax reduction strategies). In simple way please
There are many strategies which asessees use for reduce the tax burden. By using this strategy they can reduce their tax liability and will allows to generate more income by paying less tax expense in a legal manner.Tax planning is an important term because by doing proper tax planning we can reduce many taxable expenses.These are legal and ethical and this is not a one time process. We should make continuous evaluation. So lets discuss about the planning strategies for taxation purpose
1.Contribute to your retirement plan - By investing money to the retirement plan we can enjoy many tax benefits. These benefits may be short term or long term. These are not considered as taxable income.
2. Put the right assets in the right accounts - Asset allocation is very important. It means put the assets in the location. Because there are assets with high and low tax privilages. Some are highly income generating .So proper allocation should be made.
3.Bunching Tax Deductions - we can make a bunch of tax deduction. We can make a bunch of 2 yeras if we are close to the standard deduction.
4. Use a health savings account - By using health savings account we can make investment into that account and it will provide many tax benefits.
5. Buy and hold- This is another investment strategy where investors buy stocks and hold onto them for an extended period of time, regardless of market fluctuations. This is done for the purpose of reducing the tax because for long term investment tax will be less.
6. Donation - By making investment in terms of donation is also another strategy. This will provide immediate tax benefits for the assessee.
7. Invest in education saving accounts - So the main advantage of investing in savings account for getting low tax rates. For this type of savings accounts tax rates are very low.
8. Get the right level of insurance - Before selecting the Insurance policy we should take care because many insurance policy get benefited by tax advantages.
9. Long Term Care Deduction- If you have purchased long term care insurance, you will get a portion of your premium payments to be deducted. So this deduction will helps to reduce the tax liability.
10. Family Planning- By making proper family planning we can allocate different tax to different asessees in the family. someone may not paying some kind of tax and may have the right to get deductions. So make that particular arrangement will helps to reduce the taxable income. It’s not uncommon for high net-worth families to recognize they will never outlive their money.
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