Mike's Money Blog

4 Interesting Ways To Lower Your Income Taxes

Any person who is earning an income is required to pay income tax. Additionally, a tax is also paid when you purchase items, in the form of Value Added Tax (VAT). Although it is impossible to control the amount of VAT you pay, various steps can help you reduce your annual tax bill and increase your tax return. Below are four interesting ways to lower your income taxes.

File your taxes on time

Always make sure that you file your income taxes on time. As long as you delay filing the tax returns, you will be required to pay a fine. The amount of this fine increases the longer you take to make the required payment. This can result in an increase in your tax bill by several hundred dollars. To prevent this situation, it is necessary to make sure you file your taxes before the deadline issued by the authorities. Do not wait for any deadline extensions since there is no guarantee that they will be offered.

Give financial gifts

You can claim a tax deduction for any financial gifts that you give to others. These gifts can be in the form of capital investments such as shares or money. The more you are willing to give away, the higher your tax deduction. It is only the sender who is eligible for the tax deduction and not the recipient.

Increase donations to charity

Any contributions that you make to charity is not taxed. However, you should make sure that the authorities approve of the charity you have selected. Selecting a charity is easy since you just have to pick a cause to support. An example includes the welfare of children. You can then consult with the right authorities, particularly the Australian Taxation Office, to find out which charities support your selected cause and choose one. The amount donated will then be deducted when filing your tax returns, which will result in lower taxes.

Swap some of your income for allowances

Some allowances are tax-deductible, whereby an increase in these allowances will not result in increased taxes. As such, you can take advantage of this feature by opting for more allowances instead of a salary increase. A higher salary automatically means you will pay more income tax, but when you shift the additional income to cater for your allowances, your tax bill will remain constant while the amount you take home at the end of the month will increase.