Focus CPA Group, Inc. (562)281-1040

As we all know, the magic tax date is April 15th each year when tax returns must be filed. Well, at least that is what we are told. In truth, the magic period for taxes occurs in the months of November and December. Well, that is if you want to limit the amount of tax you pay on April 15th.

The subject we are talking about is, of course, tax planning. It doesn’t exactly sound appetizing, but it is. The key to limiting the pain of paying Uncle Sam every year is to plan ahead and configure your finances in a manner that maximizes tax credits and deductions. It sounds obviously, but millions of Americans leave so much money on the table each year that it is ridiculous.

Tax planning can actually be relatively simple. Let’s look at the green revolution for an example. You’ve noticed the water heater in your home is getting pretty creaky and rusting. It could go at any time. Should you wait for it to blow up and flood the home? No! Instead, you can go buy an Energy Star rated water heater. The Energy Star designation indicates the water heater meets certain efficiency criteria and qualifies for a tax credit. The tax credit with water heaters is 30 percent of the cost up to $1,500.

Let’s assume you buy and get a tax credit of $1,000. Do you realize the value of that? Tax credits are much more valuable than tax deductions. Why? Tax credits are a dollar for dollar deduction from the amount you owe Uncle Sam instead of just a way to reduce your gross income. Let’s put it in a way that is simpler to understand. You would go ahead and do your taxes just like always. Once done, you’ll owe the government some figure and would normally send in a check. Ah, but not now. Instead, you would deduct the $1,000 tax credit from that amount. It makes a huge difference!

Let’s be brutally frank. You have no right whatsoever to complain about the taxes you pay if you don’t do any planning in November or December. If you want to pay less in tax, make some effort to do so! The key is to finding a proactive CPA that can help you put together a plan that is going to slash your tax bill. This is the only real way to cut your taxes.