Legal Tax Offset
Taxes are a part of life and although individuals may pay taxes on a variety of items, one area where tax relief is available to some individuals is through the use of legal tax offsets. These legal tax offsets can be used to reduce the amount of taxes owed or even offset the entire amount owed if the offset is large enough.
Legally, tax offsets are considered to be either refundable or non-refundable. Refundable tax offsets can be applied against present or future taxes in certain circumstances and can include items such as tax credits, foreign taxes or any other amount due to a taxpayer from the Internal Revenue Service (IRS). Non-refundable tax offsets are applied only against the current tax liability. Non-refundable offsets include items such as deductions, exclusions and taxation of capital gains.
There are many types of legally applicable tax offsets available to taxpayers. One such offset is the earned income tax credit (EITC), which is available to taxpayers with low to moderate incomes. This credit was created to help lessen the burden of taxes often taken by individuals in lower income brackets. To qualify for the EITC, an individual must meet the income requirements set forth by the IRS each year. Other possible offsets include deductions for charitable contributions to qualifying organizations, deductions for student loan interest and deductions for certain medical expenses.
One of the most common types of tax offsets available to taxpayers is the standard deduction. A standard deduction is an amount that is automatically deducted from a taxpayers annual income, thus decreasing the total amount of taxable income reported on their tax return. This deduction is a great way for taxpayers to not only reduce their tax burden but also keep their tax returns simple since they do not need to itemize their deductions.
The ability to use legal tax offsets as a means of reducing one’s tax burden should not be taken lightly. While many offsets are easy to use and will produce significant savings, others may require further research or assistance from a qualified tax professional in order to be implemented. That said, tax offsets are always worth exploring as a way to maximize one’s refund or lessen the total amount of taxes due.