Matt and Carrie are married, have two children, and file a joint return. Their d
ID: 2403654 • Letter: M
Question
Matt and Carrie are married, have two children, and file a joint return. Their daughter Katie is 19 years old and is a full-time student at State University. During 2017, she completed her freshman year and one semester as a sophomore. Katie's expenses while she was away at school during the year were as follows: Use Tax Rate Schedule for reference. Tuition Class fees Books Room and board $ 5,120 330 530 4,56e Katie received a half-tuition scholarship that paid for $2,560 of her tuition costs. Katie's parents paid the rest of these expenses. Matt and Carrie are able to claim Katie as a dependent on their tax return. Matt and Carrie's 23-year-old son Todd also attended graduate school (fifth year of college) full time at a nearby college. Todd's expenses while away at school were as follows: Tuition Class fees Books Room and board 4,60 $3,e98 280Explanation / Answer
The best time to start planning your tax-saving investments is at the beginning of the financial year. Most taxpayers procrastinate till the last quarter of the year, and end up taking hurried decisions. Instead, if you plan at the start of the year, you can make investments that can also help you fulfill your long-term goals. Tax-saving investments should be used to build wealth as well, not only to just save tax.
Use the following pointers to plan your tax-saving for the year:
This way, you can figure out how much you need to invest to save taxes. It is best to begin investing in the first quarter of the financial year so that you can spread the investments over the year. Doing this won’t burden you at the end of the year and will also allow you to make informed investment decisions.
FAQs – Frequently Asked Questions
How Income Tax works in India?
We should fulfill this duty with pride because the income tax payers form a very small part of the Indian population. Government data for AY2014-15 shows that only around 1.5% of Indians pay income tax. This is because India is a developing country and 93% of Indian households earn less than ?2.5 lakh annually, which is the minimum threshold limit for income to be taxable. Furthermore, agricultural income is entirely exempt from tax even when it crosses this ?2.5 lakh limit. Hence, anyone who earns a taxable income should be proud to be a part of the tax-paying population and should dutifully fulfill this responsibility.
While the government expects you to pay income tax, it also allows you to legally save on income tax. You don’t have to pay income tax if you earn less than ?2.5 lakh in a year. Income more than that is taxed as per different slabs, with the tax rates going up with increase in income. No matter how much taxable income you earn, there are certain exemptions and deductions available to all individual and HUF taxpayers that can be used to pay less income tax.