Deferring income could lower your taxes!
If you work for yourself and pay your taxes in cash, it may be a good idea to hold off on sending out invoices until towards the end of the year. And if your clients pay you net 30 or 60, there’s a good chance you won’t receive payment until 2014. By doing so, you can lower your tax bracket which will lower your taxes.
Another way you can defer income is to make deductible purchases this year that you have been planning on making in 2014. This will lower your taxable income and save you money on taxes you could owe.
Besides just saving money on taxes, there are other good reasons you’d want to defer income. For example, you may want to make sure you hit certain thresholds for credits like child tax credits, education tax credits, etc.
Of course you can’t do this every year because it will catch up with you as you would be just postponing paying but it can be a great strategy situationally when you’re transitioning between tax brackets.
We’re always here to offer advice on when it is right for you to defer income. Everyone has a unique situation and it’s always best to get advice from a professional that understands where you are financially.