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TAX PLANNING - Coggle Diagram
TAX PLANNING
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Scope of Taxation
Application: Taxes apply to a variety of incomes, assets, and transactions.
Types of Taxes:
Income Tax: Tax on earned income, business profits, etc.
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Taxable Entities: Applies to individuals, businesses, and certain entities.
Tax Exemptions
Exempt Income: Certain sources of income are not taxable (e.g., government benefits, some gifts).
Exemptions for Individuals: Specific exemptions based on personal circumstances (e.g., charity donations, education expenses).
Types of Income
Employment Income: Salaries, wages, bonuses, and allowances from employment.
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Other Sources: Rental income, royalties, and other passive incomes.
Investment Income: Income from dividends, interest, and capital gains.
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Donations and Gifts
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Gifts: Gifts of certain types, such as those for charitable purposes, may also offer tax benefits.
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Record Keeping
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Documents to Keep:
Salary Information: EA/EC forms, salary slips.
Expense Receipts: Medical, donation, insurance premium, and other deductible expenses.
Proof of Investments: Documents related to dividends, interest, or other investments.
Family Documents: Birth certificates, marriage certificates, etc.
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Tax Planning Strategies
Tax Avoidance:
Legitimate Strategy: Reducing tax liability through legal means like deductions, exemptions, and tax credits.
Financial Decisions: Taxes influence key financial decisions, especially in purchases, investments, and retirement planning.
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