Planning Your Taxes: Managing Income

Last updated on November 4, 2023

Successful financial and tax planning will allow you to lower your tax liability and to gain the most from your investments. How you use your income is of primary significance. The more you spend and invest, the lower your adjusted gross income (AGI) becomes. The AGI is your income from all sources after adjustments. The more you can deduct from your AGI, the less you will need to pay in taxes.

A good way to lower your AGI is to make contributions to your 401(k) or other retirement plans. This will not only help you to save more in taxes, but also save for your future. Along with making investments that allow you tax savings, using tax credits and deductions can also help to lower your taxable income.

As the tax season is only a few months away, you might want to determine where you are in your tax bracket. If you are touching the lower limit of your tax bracket, you may be able to drop down to the lower bracket by making a large contribution to your retirement account, making a charitable contribution, or postponing income until next year. You may also explore other tax deductions that you may qualify for.

Savings, however, are the best and the simplest method to lower your tax liability while maximizing the financial benefits of the income that you receive. By making a few strategic moves at the end of the year, you can save considerably more in taxes than you otherwise would.