Increasing your tax deductions
by Harleen Kaur - April 9, 2011
Canada, 9th April: Do you know how to increase your tax deductions and lower your taxable income? Let us find how this can be done in the following article---
Before proceeding with the tax deduction ways, let us know the meaning of taxable income for a layman.
Simply stated, taxable income is the income used for arriving at the income tax due to be paid by either an individual or a firm. It’s the gross income from which all exemptions, deductions and similar adjustments have been deducted in a given year.
The figure thus arrived at is known as the amount of final taxable income.
Any income received from appreciated value of assets capitalized or sold during a given year as well as the income from interests and dividends is said to be taxable income for a given year.
Strategies to be followed---
Planning your donations---These days, you can come across a range of possibilities with different charitable donations to get the maximum possible tax deductions. This is especially true if you are aware of any higher taxes on your income in the coming year. In such a scenario, the best thing is to go in for big charities for making your costs at the minimum level while maximizing the tax deductions.
Donation of household things—Cleaning up your home from unnecessary household articles and donating these is a good way for cutting back your tax expenses. The only thing to be kept in mind is that the tax deduction cannot go beyond 30 percent of your total taxable income.
You can make donations of household goods and clothes to churches or charities or even re-sell these in case they need such things. Make sure to get a written receipt for all donations made in kind along with a detailed record-keeping of donated items and their total value. If the goods donated by you exceed $5,000, you should get an official appraisal.
Ask for receipt of any cash donations exceeding $250—You need to have a confirmation in writing of any donations in cash above $250. Such records give weight when your tax records are checked. Make it a habit to begin making detailed records at the start of the year and keep all receipts of donations intact.
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