There are many things in life that we try to plan. We struggle to buy a house and a car, plan for our children's future, and plan for our retirement. Many people do not plan their income taxes because they don't know anything about it. What is income tax planning? Why is this important?

The most important part of tax planning is minimizing your taxes. Income tax planning involves determining which tax laws apply to you.

Everyone's income situation is different and subject to certain rules. To make sure you're reducing your tax liability, you need to create a tax plan, which can be done in three different ways.

The first way to do an income tax plan is through your adjusted gross income. AGI is the result of adding and subtracting certain aspects of your income.

Things like investments are included in your salary, while things like mortgage payments are deducted from your salary. More total AGI means more tax liability.

If you want to reduce your tax liability through your adjusted gross income, start a retirement plan. When you add money to this plan, your income goes down, which in turn lowers your tax liability.

Another way to reduce your taxes through a tax plan is through deductions. Most people think that tax deductions are only for business owners. It is helpful to itemize your deductions. Many people can reduce things like health care costs, car registration fees, interest on their mortgage, and charitable donations.

Tax credits are a third aid in your income tax plan. There are many different types of tax credits, and you will not be eligible for all of them. However, some can even help reduce the amount of taxes you owe.

There are tax credits for college, some credits for home renovation and adoption. The most common is the earned income credit. Using the credits available to you can help reduce the taxes you owe.

You can also reduce the amount of tax you owe by increasing the amount deducted from your pay check. In fact, by increasing the amount deducted from your salary, you get a big refund on your income tax.

Receipts should always be kept. You never know what could be claimed as a deduction. Home improvements, gas costs, and anything related to your job may be eligible. If your itemized deductions are higher than the standard deductions, you can select them, but you can use both types of deductions.

When people hear the question, what is an income tax plan, they often think it's just about collecting your taxes correctly, but it's more than that.

It's about what you do before you file income tax returns making sure you're doing everything you can to lower your taxes as much as possible.

Paying income tax should be considered a good thing for people who fall under the taxable income slabs. You are contributing to the development of your country and also helping the less fortunate.

However, it does not mean you have to pay a large chunk of your income. If you understand the income tax laws and policies of your country well enough, you may find a lot of opportunities to lower your taxable income.