A key goal of tax planning is to legally minimize or defer t

A key goal of tax planning is to legally minimize or defer taxes. This is done by focusing on key components of taxable income. How can timing strategies and income-shifting strategies be used to affect deductions for adjusted gross income (AGI), dependency exemptions, itemized deductions, and tax credits? Provide at least one example for each, but no more than three.

Solution

Taxpayers can transfer income to affect deductions for AGI by taking securities like bonds or stocks and transferring these securities to their children.. By transferring the income to their children (in the form of securities), the taxpayers drop their personal tax liabilities, for AGI.

Itemized deductions could be used, for tax planning and minimize taxes. If don’t meet the standard deduction for this year, there will be no purpose in me trying to pay additional expenses for tax purposes.

Tax credits can be, and take advantage of the residential energy credit, which reduces income tax liability.