How to Lower Inheritance Tax
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They say that two things are inevitable in life: death and taxes. We don’t care much thinking about either. Inheritance tax is the one tax we don’t pay until we are dead, so perhaps understandably it’s a subject way down our list of priorities.
The following are the major ways of lowering your inheritance tax
- It is important to write a will and specify who your heirs are so that there is no confusion later on. It is also a good idea to transfer your estate into life insurance funds, or trusts on which tax does not have to be paid. In this way, the spouse, as well as the further generations, can benefit from your estate. They will receive regular income without the burden of the tax, as they will not own the entire estate.
- You can engage your money in investments that are charged with a lower tax rate. Utilise the annual allowances granted to you with gifts. Regular gifts made from your estate are exempted from taxes, thus, you can help your family without the trouble and hassle of inheritance tax.
- You can take advantage of the tax credit reducing your taxes pound for pound. The list of possible tax credits changes every year. You may qualify for the tax credit by doing a simple thing such as adding insulation to your home.
- Tax-free income maximisation, some types of income are not taxable, unless under certain conditions. Such income includes life insurance, scholarship money, benefits, child support payments, inheritances, gifts and bequests, and sickness or physical injury damage awards. This is a sure way to lower your inheritance taxes.
- Shift your income to others, you can let others such as your children carry your tax burden if you are in the high tax bracket. This is done by shifting your income to others with lower tax brackets. However, the law has changed, making this strategy harder than before. Nevertheless, it is still a viable way to lower your taxes.
- Taking tax deductions, Taking tax deductions is one of the best ways to lower your tax. If you have more deductions, you will in turn pay less tax. To nail this, you should know all the possible deductions that may work in your favour and take advantage of them throughout the year.
- You can choose the best filing status and the number of exemptions, consider your tax filing status since it has a profound effect on the taxes that you pay. As one of the individual taxpayers, you are eligible for tax exemptions. You may be entitled to many exemptions if you have children depending on you or other dependents such as spouses who are disabled.
Conclusion
You cannot avoid inheritance tax, but you can minimise the effect they have on your finances. With careful planning and research, you can lower your overall tax prospect. Contact us for more information on how to lower your income tax.