How to use this tool
How to use this tool
Basic Facts about Taxes
by Roger Wohlner (Write for us!)
(Click on the links within the article to get definition of that word)
(Click on the links within the article to get definition of that word)
The subject of income taxes is one that most people would
prefer to ignore. However, since income taxes are a significant expense for most taxpayers, you should come to grips with some basics about taxes:
- Realize you can exert some degree of control over how much you pay in income taxes.
While you do have to file and pay taxes every year, how much you pay depends on the tax strategies used. Discuss your tax situation with a tax professional, reviewing ways to help reduce your income tax bill.
- Understand basic tax concepts.
You don't have to become a tax expert, but you should have a basic understanding of the tax laws so you recognize when you need assistance. Before entering into a major transaction, such as selling your home or securities, review the tax ramifications. For instance, you might find holding a security a little longer will result in gains being subject to capital gains tax rates rather than ordinary income tax rates.
- Don't make decisions solely for tax reasons.
While you want to minimize the payment of income taxes, that is only one factor in most financial decisions. You should first make sure the transaction is economically beneficial, and then decide how to minimize the tax effects. For instance, perhaps you are considering selling a stock with gains. If you hold the stock for another month, that gain will be subject to capital gains tax rates. However, during that time, the stock's value could go down. You need to decide whether the benefit of lower tax rates would offset the risk that the stock's value could go down.
- Keep good tax records.
During the year, file any records with possible tax ramifications. That way, when it comes time to file your income tax return, all your tax records will be located in one place and you won't forget a tax deduction.
Email this Article
Print this Article
Cite this Article
Other Suggested Articles
The New Tax Law: What's in It for You? >
Explanation of the Major Factors Affecting Your Tax Returns >
Do You Have a Tax Problem? >
A Guide to Filing Your Tax Returns >
Tax Issues Related to Wash Sales, Lottery Winnings etc. >
Another Tax Season Is Here >
Tax Issues Related to Your Business >
Tax Considerations >
Explanation of the Capital Gains Tax and Related Issues >
Introduction to Taxes and Basic Information >
Other Articles By This Author
Reevaluating Your Portfolio >
Money and Marriage >
Watch Out for These Mistakes >
Make Rebalancing a Habit >
Do You Have a Budget? >
10 Tax Strategies to Consider >
Consider a Conversion >
Is There Still a Need for Second-to-Die Life? >
Is an Interest-Only Mortgage Right for You? >
The Basics of Credit Scores >
Article reprinted with permission. Unauthorized reproduction of this content is prohibited.
Click here to license InvestorGuide University content.
Click here to license InvestorGuide University content.
