All About Taxable Income

Make Less Of Your Taxable Income

No one wants to pay taxes. But you can make less of your taxable income by learning about tax deductions and tax returns.

Let’s face it. Taxes are annoying. We have to pay them everyday, whether we pay sales tax or when the government takes them from our paychecks. To top it off, every April we have to line up at the post office (seconds before the deadline) to get our federal income tax returns in the mail. The worst part about it all is no matter how much we hate them and how much we complain, we still have to pay them.

If you choose to pay an accountant to do your taxes for you that’s great, but it can end up taking more money out of your pocket that you don’t have to spend. You can reduce the amount of taxes you pay; all you need is the proper money management education.

Taxable income is the amount of your income you pay taxes on. It may seem as if you pay taxes on every penny you make, but there are ways to make less it. Of course, you’re still going to have to pay taxes, but you may be able to cut them down a little for a tad extra money you can do other things with.

The first step is to look at all the income you may be making that is taxable vs. non taxable.

Here is a list of taxable income:

• Your paycheck/salary

• Interest earned from savings accounts and/or checking accounts

• Tips (for servers/bartenders)

• Bonuses, severance pay, sick pay

• Interest earned on bonds (except tax-free bonds)

• Gambling winnings (lottery winnings)

• Capital gains from mutual funds and other investments (stocks included)

• Unemployment compensation

• Withdrawals from IRA or annuity

Here is a list of nontaxable income:

• 401(k) money (including money that’s rolled over when you change jobs)

• Money deposited into certain retirement accounts

• Return of invested capital

• Child support payments

• Disability income on benefits you paid for with after-tax dollars

• Money you’ve lent that is repaid

Once you’ve totaled your income (lines 1 through 21 on your 1040 return), you may be able to take off adjustments. These include moving expenses, IRA deductions, and so on. For example, if you move because you get a new job 50 miles away from your previous employer, you can deduct the cost of moving your things plus the miles you drive at a rate of 12 cents a mile.

After taking your income, subtracting all the adjustments, you’re left with your adjusted gross income (AGI). The next step is to incorporate all of your tax deductions.

Click here to learn more about tax deductions.

As April approaches, you have decisions to make on how you want to file your federal income tax report:

"Do I want to file for myself?"

"Do I want an accountant?"

"Should I pay online?"

Doing your tax returns is like a household project you put off for a while, but will only take a day of your time. Eventually it becomes a bigger project than you intended as the deadline approaches.

Click here to learn more about your tax returns.

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