The standard deduction is a fixed dollar amount that taxpayers can subtract from their income to reduce their taxable income.
Tax loss harvesting involves selling investments at a loss to offset capital gains and reduce overall tax liability.
Capital gains are taxed at different rates depending on whether they are short-term or long-term, impacting tax planning strategies.
The Child Tax Credit directly reduces the amount of tax owed, unlike deductions which reduce taxable income.
Contributions to a Traditional IRA may be tax-deductible, and the investment earnings grow tax-deferred until withdrawal.
Withdrawals from a Roth IRA are tax-free if they meet the criteria for qualified distributions.
An HSA allows individuals to save money tax-free for qualified medical expenses, providing a triple tax advantage: contributions, earnings, and withdrawals for medical expenses are all tax-free.
The primary goal of tax planning is to arrange financial affairs in a way that minimizes tax liability.
A 529 Plan is a tax-advantaged savings plan designed to encourage saving for future education costs.
Charitable contributions can be itemized and deducted from taxable income, thereby reducing the overall tax liability.
State and local taxes paid can be itemized and deducted from taxable income if the taxpayer chooses to itemize deductions instead of taking the standard deduction.
