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Tax Tips for Employees to Minimize Tax Liability

   

Added on  2019-09-30

6 Pages1635 Words233 Views
Income Under Head SalariesAmount in $Amount in $Salary130000130000Income under head Rental PropertiesRental Income6971Less: Interest paid7600 Depreciation19571(20199)Other IncomeDividend87845Medical Compensation8000Spouse Income64000159845LTCGBHP51462MYR(27530)23932Total Income269646Less: Deductionsi)Contribution to12000Superannuation fundii)Donation4200iii)Insurance3000iv)Premium1260v)Interest paid15000vi)Spouse's Deduction120036660

Taxable Income 232986Tax LiabilityUp to 1865010%1865From 18651-7590015%8588From 75901- 15310025%19300Balance28%22368Tax on LTCG15%359055710Less: Tax Withheld38376 Tax Credit on dividend2940067776Refund12066From above, it is clear that client has credit available for its tax payments as Company hasalready deducted withholding tax and dividend what he received is fully franked meanscompany has already paid tax on the amount of dividend distribution which a shareholder canclaim as credit while calculating its tax liability. Further client has insurance policy, medi-claim, and donation to lower its tax liability. In thiscase, where he is demanding of refund, he can lower down its donation amount.Client has already made investment to lower down its tax liability.Advice The big tax breaks are found in the realm of business and real estate, but there are things you can do as an employee that can help you take a bite out of your tax load. I’d like to share some tax pointers for those who are holding down jobs and are employed. I’d call them tax tips for the working stiff, which you can use to mitigate the tax hits that come your way:

1.Participate in your employer’s benefit plans for pre-tax treatment on the following:Commuter Benefits.I once held down a job in the city, and back then, I had to pay for parking or mass transit on a regular basis. But by participating in a commuter pre-tax program, I easily saved $1,000 a year on commuter fees.Group Life Insurance.Some employers offer life insurance plans and when they do, the premiums can be pre-taxed.Group Long-Term Disability Insurance.This can be pre-taxed as well if this is available to you as an employee, and I’ve actually seen group premiums that were such a bargain that it would be a crime not to purchase the insurance.Use a Flexible Spending Plan.Consider contributions to a flexible spending account. You will need to estimate how much you are going to spend because any unused amount is not returned to you. This type of account can save you a mint. Note however, that Obamacare threatens tocap your FSA contributions to $2,500by 2013. Such a shame, really, since you could use this for daycare or certain medical costs. In my neck of the woods, daycare is around $600 a month. That amounts to over $7,000 a year, and without any caps, the resulting tax savings could be over $2,000 a year. Nevertheless, you can still estimate how much your family spends for health services, medications and prescriptions not covered by your health insurance, and apply for a flexible spending account that can cover these expenses.Charitable Contribution Matching.There are employers that hold charity drives with special provisions. If you decide to participate in an employer-sponsored charity event, not only is your donation tax deductible or pre-taxed, but it may also qualify for a matchable contribution from a magnanimous employer. I worked at a company that actually organized charity programs that worked this way, and it was great to see my donation go a long way, thanks to my employer’s matching funds.

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