8 Easy Ways to Save on Income Taxes

Save All You Can On Your Taxes
By: Guest Tax Poster George
It is very possible to save money on income taxes. The following are eight different ways that an individual or family can save.

#1 Work At Home

Many wise individuals choose to work from home. Working at home has many benefits. When individuals work home, they’re able to save on taxes. When an individual can section off a portion of their home for their office, then they can report that as a deduction on their taxes. It is very important that the individual that decides to work at home has a work area that is separate from other rooms in their house.

#2 Cashing In On A New Home Loan

Every year individuals choose to refinance or buy a home. It’s important to deduct the original fee and discount points on that loan. When an individual does that, they can spread the deduction over the life of the refinance and they can deduct the remaining points from the first loan. Many people do not take advantage of this amazing tax rule, but it makes sense to use it. A quality CPA will know about this tax deduction, but it is good to do research either way.

#3 Make Sure To Take Advantage Of Any Write Offs

Each year and individual can offset their investment gains with losses. If the losses that individual has is more than what they gained, then they can deduct up to $3000 from their standard income. The rest that is left over can be carried forward to the next year. It is wise to look at the tax returns from the previous year and investigate the capital losses that were not used. In that way those returns can become more affordable. If an individual has to pay a certain amount to manage their safe deposit box, calls to their broker, or fees for tax preparation, then they can all be deducted.

#4 Take Advantage Of Self-Improvement

There are many things that health savvy individuals do to stay healthy. If an individual is sick, there are measures that must be taken to get well. Sometimes an individual’s hard work at taking care of themselves can be taken out of their taxes. Any medical costs that are qualified and go over 7.5% of the annual gross income are deductible (10% for most now). These things can include the following items: weight-loss programs that are prescribed by Dr., classes to stop smoking, acupuncture, massage therapy, chiropractic care, braces, eyeglasses, and occupational therapy. There is a complete list available on the IRS publication number 502.

#5 Take Advantage Of Sales Tax.

There is an option to write off either local income tax or sales tax. There are IRS tables that are available in publication 600 that an individual can use to find out their deduction. If a car, a plane, or boat was bought in the previous year, that can also be added to their IRS deduction.

#6 Make Sure To Include College

If there is a student in college, then it is a great tax benefit that can be deducted for tuition and fees. An individuals annual gross income cannot be over 135,000 if they are married and 65,000 if they are single. There is also a credit that can recuperate up to $1500 of tuition during individuals first two years of college. There’s also a Lifetime Learning Credit that gives up to $2000 for individuals in college.

#7 Make Sure To Include The Kids.

Many parents do make sure to include their kids when they are reporting their taxes, but even if an individual is divorced or a parent of an adopted child, they can still get the parenthood benefits. With a child tax credit, an individual can take the full credit for a child.

# 8 File Electronically

When an individual files for their taxes electronically, they can get their refund sooner and it will have less mistakes. There are are many high quality software programs that are available like TurboTax, or H&R Block. These usually cost a lot less than having to buy the software, and the price for doing e-filing is a lot less than doing paper filing as well. The IRS allows individuals to file their taxes for free online and it is only for those individuals that have an adjusted gross income of $50,000 or less.

It is great to know that a person can file their taxes and still have things be affordable. Some individuals choose to use a CPA for their tax preparation, but when it comes to income taxes, it is possible for a person to do things on their own as well. Whatever the case may be, it is important to make sure that a full investigation goes into these actions, because a person could save themselves thousands of dollars if their taxes are prepared in the correct manner.

The Future of Income Tax Regulation

As time goes on, each political campaign mentions either abolishing the IRS or simplifying the code to allow for easier completion.

I am not confident in either of those taking place. While the simplification of the code would do wonders, the complexity of it also aides in positive reinforcement.

Things such as adopting children, going to college, buying a energy efficient car, are often things done through the tax code to get the public to do something. Not saying that is right or wrong, it just is what it is.

Whenever you get politics involved, the process becomes very time consuming and difficult, as every special interest group and lobbyist is after their time and vote. So getting pulled in a million different directions just makes it even harder to get real reform completed.  No matter what happens, someone will not be happy with the changes.

One area that I think will never change is the charitable deduction. There is too much pressure on this as many people give to Goodwill and Salvation Army. One thing I could see though is additional phase outs for high income earners.  The AMT is getting enough pressure as it is though, so that is another sticky topic will will discuss in future tax articles.

While there is lobbying on behalf of tax preparers, there will always be a segment of the population that needs some sort of advice and financial wisdom, so your jobs are not going away, only perhaps change a bit as time moves on and the IRS evolves.

Tax code is extremely complex and if you do not feel confident or have a unique circumstance, seek the help of a tax professional near you.

Saving Those Tax Receipts – Do I need To?

Many times people ask, “Do I need to save every single receipt?”

Taxes Sign Showing Tax Or Taxation

Generally speaking, if you make a good faith charitable donation, it is technically deductible. However, in the case of an IRS audit, you would not be able to support your position and your deduction would be disallowed.

So if you do make the donation, but just forget to get the receipt, you can track and claim it in most cases, just be prepared to lose the deduction if it gets questions.

Each situation is  unique though, so be sure to check with your tax advisor for more information.

Another thing to look into, is possibly buying a receipt scanner or maybe use a free app that can scan and save the receipts. Note, that unless you have a small business or have tons of receipts, this level of detail may not be needed.

When compiling all your tax information for the year, do not just throw it all in a folder and let the tax person try to find everything. It is often easier if both parties know exactly what is going on and what is expected. When the client fully grasps what they are doing and why, they often benefit even more with the use of a tax preparation expert.

Another tip when a person is close to itemizing each year is to structure your charitable deductions and other itemization, so that you load up on them in every other year to maximize the overall tax benefit. One example of this would be paying your January mortgage payment in December every other year.  Things of that nature.

Overall, if you keep generally good records and at least file everything in a somewhat organized fashion, tax time does not have to be a stressful time of year!

Tax Planning For Dummies – 7 FREE Ways to Get Financially Organized

How To Get My Taxes In Order

Do not let the complexities of taxes scare you.  While you may not be able to complete your own return, you can at least have enough knowledge to make wise financial decisions that impact your taxes.

Completing tax information.

 

 

 

 

There is nothing worse for your CPA or tax preparer than being a client that has no clue what is going on or why their choices impact tax planning.

But it is not that hard to focus on seem basic concepts that will help everyone stay more organized in this hectic world we live in.

1. Use The Free Tax Tools Available

There are many free tools available to help you organize your taxes.  You should start by asking your tax prep person, or find a “tax organizer”.

2. Just Google It

From item 1 above, just google “tax checklist” or “income tax organizer” and you will see tons of free items available. Some sites may want you to sign up and they email it to you, so use an email that you do not mind some ads being sent to.

3. Use IRS FREE FILE

If you make around $60,000 or less and have a relativity simple return, the IRS partners with various tax companies to allow a FREE federal return.  Check it out here: https://www.irs.gov/uac/free-file-do-your-federal-taxes-for-free

The benefit for these companies is they charge for a state tax return and most people do not want the hassle, so they just pay. Look for a free state return option elsewhere. Save your money.

4. Visit Tax Message Forums Online

You can get so much knowledge by just taking the time to search sites such as http://www.taxprotalk.com/forums/

Many professional preparers chat here and offer great advice.

5. Ask Friends For Advice Or Their CPA

Good word of mouth advertising is often more reliable than checking the phone book or Google for the answer. Friends and family are often the ones you can trust.

6. Check Online Review Services

Ones such as Angie’s List or Thumbtack and provide good feedback and reviews than can help you determine a quality CPA or EA, in case you need professional advice for your income taxes.

7. Common Sense – Just Save Documents

When in doubt, save all documents that you think are related to your taxes. Try to separate them by type, such as medical bills, charity, or improvements that may have energy credits for example. If you or your children are attending college, the American Opportunity and Lifetime Learning credits are great.

Overall, there are not many stressful situations as tax time for many. However, it is normally not as bad as you think and with a little planning can become just another simple task that is completed each and every year.