4 Powerful Ways To Lower Your Taxes

Reducing your tax burden is vital to building wealth. Here are a few powerful and effective strategies for doing so.

Qualified Retirement Plan

A QRP is a plan that meets the criteria for a tax-deferment and/or tax-deduction. Traditional IRA's, or individual retirement accounts, are a popular type of QRP. Their most common advantage is the before tax deduction. A second advantage is deferring taxes on earnings.

Roth IRA are different in that the contributions are not tax deductible and do not have an immediate effect on income taxes, but could lower future taxes considerably. You won't miss the money put into a retirement account after just a few months. You will experience even more satisfaction if your employer matches your contributions.

Lower Investment Taxes

There's good news if you have investment income from dividends or capital gains. The maximum tax you'll pay on most dividends and long-term capital gains falls to 15% through 2008. You get an even better break if you're in the lower two tax brackets. This new system presents real tax-saving prospects depending on your particular situation. For example, it's worth planning the timing of any sales to make sure they're long-term gains and qualify for the lower rate.

Home Ownership

Owning your own home is one of the best investments you'll ever make. This should be your next financial move if you're not currently a home owner. You receive a deduction for the mortgage interest paid, also including property taxes. Over time you will be reducing the mortgage principle owned, and the property will appreciate in value. Mortgage pay down and property appreciation combined increases your equity.

The equity in your home will become one of your greatest financial assets as well as provide you a wonderful sense of financial security.

Small Business Ownership

Investing in a business is one of the most powerful tax strategies available today. The US has two tax systems: one for employees, which is designed to take your wealth, and one for self-employed people, which is designed to create economic growth.

You receive many special tax deductions for operating a business, even if it's in your home. The IRS wants to know, is this expense "ordinary and necessary" in operating your specific business? If so, it can be deducted. For example, if you hire your children in your business and pay them a "fair wage" for the service rendered, then this wage can deducted. If they were to use part or all of this money to pay for their own college education, or their own wedding, or their own car, you are receiving a tax deduction for the wage paid, but then they will be able to use it for things you may have intended to pay for with after taxed dollars. Now you money goes further, much further.

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-Jim Guarino, CEO of http://www.TheMoneyExpert.com