10 WAYS TO SAVE ON YOUR TAXES
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6: Refinance Points
Due to relatively low interest rates more people are choosing to refinance their home mortgages. Additionally, many of those who did so paid loan
points. It’s important to note that you may be able to amortize those points over the life of the loan and generate an additional interest deduction.
7: Properly Calculate Your Basis in Stocks
Perhaps the biggest mistake that people make is not properly calculating the basis of their stock.
What I mean by this is that most people fail to properly take into account all of the various costs and fees associated with their trading. When you buy stock, you’ll pay broker commissions. Even in today’s era of low commission trading, it can still add up. You may also pay transfer fees. These expenses are added to the purchase price of the stock and remain with the stock until sold. Once you sell the shares, make sure to reduce your gross sales price by the amount of these expenses. Remember also to reconcile your sales to the Form 1099B you received from your brokerage firm. This may seem like a small amount but it can add up to a lot of money over a year’s time.
8: Hire Your Children
Remember that self-employed small business owners can deduct the costs of hiring their children as workers. Think about it. Chances are you’re giving them money anyway. How about if you can help them learn some responsibility and get a tax deduction at the same time? If your business is unincorporated and your children are under 18, you won’t be liable for any Social Security or Medicare taxes. Additionally, you can pay each child as much as $6,300 ($4,300 standard deduction plus $2,000 IRA contribution), deduct the sum in full, and they pay zero taxes. How many children do you have? Could this add up to a big chunk of money? You better believe it! What’s even better is that the money contributed into the IRA can grow on a tax deferred basis enabling you to help build wealth for your children and get it out of your estate at the same time thereby lowering estate taxes. This is a truly great strategy.
9: Deduct the Expense of Tax Preparation
One of the expenses that most people fail to deduct and almost always fail to fully utilize is the expense of tax preparation programs. This may come in the form of a book, a software program, a seminar, or even the services of a qualified tax preparer. First of all, it is important to realize that these expenses are fully deductible. Not only that, they can pay for themselves many times over. I often hear people talking about the “expense” that they incur for these services. One of my favorite sayings is that, “It is far more expensive not to pay for tax preparation programs than it will ever be to pay for them.” Whether you plan on doing your own taxes or paying someone to do them for you, be sure to seek professional counsel. Remember, it pays you and it’s fully deductible!
10: Start Your Own Small Business
The greatest tax shelter in the country today is to start and operate your own small business. This may sound strange to many people but it is absolutely true. For many, the thought of having to deal with the pressures of operating their own business seems insurmountable. The reality however, is that it can be the most profitable undertaking you ever become involved in. The reason for this is that businesses can take far more in the way of deductions than individuals can ever dream of. This fact alone makes it essential to start your own business and to start it today!
One of the first questions to be answered is what type of business you will be engaged in. The answer to this is: why limit yourself to only one? It is advisable to involve yourself in multiple businesses in order to produce multiple streams of income. Another tremendous aspect of this is that you can also create multiple business deductions.
Another step is to decide what type of business you will be. There are many different types of business structure that you can choose. Each of these structures has its own set of advantages as well as disadvantages which must be considered.
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