Tax Planning

This plays a central role in personal financial planning. Taxation planning aims at helping an individual pay the lowest amount of tax possible as allowed under the law.

The following is the taxation of different types of incomes.

There are a large number of income sources for people. Some generate their income from a single source while other people generate their income from numerous sources. It is very possible for an investor to reduce the amount of money to be paid as tax by simply converting one type of income into another which is considered to have tax advantages.

If you are employed and receive income as a result, such income is fully taxed at applicable personal, rates.

The income received from investments is taxed at rates which are dependent on the type of income earned. If the income is earned as interest, then it is fully taxed. Finally, it is only 50 per cent of capital gains which are taxed.

What is tax referral?

In case income can be spread over a period of time, then, it is possible to defer tax as well.

Income Splitting

This is a technique used to reduce the amount of taxes paid by transferring income from a higher tax bracket family member to a lower tax bracket one. In many countries, the law tries to prevent income splitting as much as possible.

In a case where your spouse has no income, then, it is useless to start paying such spouse with some income. The point is that you will still pay tax for that income split and paid to the spouse.

Income generated by property that has been transferred to a spouse is traced back to the source of the gift. In case the spouse re-invests the income, now that income will be taxed under the name of the spouse.

Charitable Donations

When gifts are made to charitable organizations, there are many associated benefits. Note that this depends on the type of gift that is transferred. The nature of the charitable organization and the timing of the gifts are also carefully considered. The action of providing gifts brings great tax benefits to your estate taxes.