One of the largest expenses you have is the income tax you pay. If you continually pay more than necessary, you diminish your ability to build your wealth to accomplish important financial goals.

The only effective way to cut your taxes is to do regular tax planning. Always consider the tax consequences of any transaction before the fact; seek professional assistance any time dollar amounts are significant.

Following are a few tax tips for individuals. For assistance in identifying the tax-cutting strategies best suited to your particular situation, contact my office. I’m here to help you minimize your taxes – this year and every year.

1. Don’t lose your mortgage points deduction. When you refinance a mortgage, you’re required to deduct the points over the life of the loan. But if you refinance again or sell the home, you can write off the remaining undeducted amount in that year.

2. Check your exposure to the alternative minimum tax (AMT) as part of your tax planning. Because the AMT exemption amount is not indexed for inflation, this tax is hitting more middle-income taxpayers. You may need to consider moves to lessen the AMT’s impact on you.

3. Maximize dependency deductions. If you are helping to support an elderly parent, your college-age child, or others, know the requirements that will give you a dependency exemption. Don’t let poor planning or paying for the wrong expenses cost you a tax-cutting dependency exemption.

4. Don’t aggravate your tax bill with penalty charges. If you are required to make estimated tax payments, be certain that you are paying the minimum required. In most cases, that’s 100% of your prior year’s tax liability.

5. Give appreciated property to charity rather than cash. You’ll generally get a charitable deduction for the property’s market value without having to pay capital gains tax on the appreciation. Get details before you give, however, because other restrictions could apply.

6. If you plan to sell a piece of investment real estate and replace it with other investment property, you should look into a tax-deferred exchange.

7. Take a tax deduction for bad debts. If you lent money and it’s beginning to look as though the loan is uncollectible, take steps to provide evidence of your attempts to collect. These steps will help substantiate a bad debt deduction on your tax return.

8. Consider taxes in any major financial transaction. Before making any major financial decision, get the facts on the tax consequences involved. By structuring a transaction a certain way, you can often save significant tax dollars.

The major objective for most people in business is to maximize profits. Cutting your taxes will help you achieve that goal. Review these tax tips; then contact me for assistance in identifying and implementing the best strategies for you.

1. Choose your legal form of doing business carefully. The tax and nontax consequences of the form you select are significant. The basic forms of operation from which to choose include sole proprietorship, partnership, corporation, or limited liability company. Seek professional assistance before deciding, and review your chosen business form from time to time to see if it’s still appropriate.

2. Incorporate and elect S status. If your sole proprietorship or partnership is producing a net profit in excess of a reasonable compensation for your time, you could save money by operating as an S corporation. You’re required to take a reasonable salary for the work you do but no more than that. With an S corporation, the salary you take will be subject to both income and payroll taxes. The profits above that amount are subject to income tax but not payroll taxes.

3. Consider switching from the accrual method to the cash method of accounting if you meet the qualifications. Under the cash method, you generally report income to the IRS in the year you receive payment from customers. Under the accrual method, you report income when a sale is made to a customer regardless of when the bill is paid. Most business owners prefer the simpler cash method.

4. Hire your children to work in your business. Wages paid will be deductible by your company and taxable to the family member. Your child’s earnings will probably fall in a lower tax bracket than yours. Payroll taxes apply to such wages; however, if your business is a proprietorship or family partnership, they do not apply to wages paid to your children under 18. Compensation paid has to be reasonable for the services preformed.

5. Keep good records for all business travel, meal, and entertainment expenses. Travel that you do in conjunction with your business is deductible, but business meal and entertainment expenses are generally only partially deductible.

6. If you conduct business from your home, become familiar with the rules for home office deductions. Accurate records may preserve your deductions.

7. Don’t subject yourself to tax penalties by misclassifying an employee as an independent contractor. The IRS is aware that employers prefer to treat workers as independent contractors to avoid paying fringe benefits and payroll taxes. If you’re not absolutely sure how to treat a given worker, contact me.

8. Use your tax advisor wisely. I can best serve you by assisting you in carefully planning your important financial moves so they’re structured to minimize taxes. Please check proposed transactions with me before you complete them.