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Or you can now use TapaTalk again!Any tips on lowering TAXES?
- Thread starter thinks
- Start date
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For example, I had read somewhere a while back for homeowners for every other year (I believe) in Dec. you pay your Jan. mtg in Dec. to get tax savings (more) for the tax year. Any comments?
Does anyone do, for instance, a home side business to reduce taxes and care to add your two cents?imported post
thinks wrote:
That is a good idea, I never thought of that: Pay your mortgage Dec. 31 instead of Jan 1. Similarly, I hold off collecting December's business income until January for the same reason. I also buy business stuff in Dec if I think I will buy it within the next 3 or 4 months.
thinks wrote:
Oh yes! A sideline businnes will open the door to many tax benefits. For the first two years, I probably saved as much money in taxes as I made in business income. A quick read that covers a lot of it: 422 Tax Deductions.
What I get out of it:
- SEP IRA, treated like a traditional IRA, can contribute up to 20% net business income
- Office expenses, office expenses, office expenses! My substantial amount of computer equipment andsoftware, books, certification tests, cell phone, the office fridge, all the caffeinated beverages in the office fridge
- Home Office deductions, based on square-footage. I can deduct 10% of all home-related expenses (utility bills, insurance, lawn care, repairs, etc.)
- 39 cents/mile if you drive for work, an entire vehicle if you have one strictly for business.
- Business vacations...er, I mean trips
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A lot depends on the money you make in each year. If you know that you will be getting a new job in the next year and your income will be going up significantly, you could decide not to pay your december house payment till Jan and then your next Jan payment will be made in Dec. Then you will have more right-offs for the next year you do your taxes when you have more income to be taxed. Uncle Sam doesn't really care which way you go, because in the long run, it all breaks out even. If you are deciding to pay next Jan mortgage in Dec. Then the next year you will not have that option. You will only have 11 months to right off taxes unless you do the same thing again and then you will have 12, but you will have to do it every year to keep it that way.You make your decisions on this years income and what tax break you are looking for compared to next years income, whether you need a bigger tax break or not.
Frizz B.imported post
Careful though with those home businesses. The IRS is looking at those really closely and if you dont establish a legitimate business (subject to a host of IRS rules), you wont qualify for these types of deductions. Make sure and visit the IRS's website and download their home business scam warning sheet before dabbling in this to make sure you do it right.
pyriel
Active member
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thinks wrote:
By paying the monthly January mortgage in December, one will be able to get tax savings. However, it will not work for the following year since you only have 11 monthly mortgage left. If one decide to repeat the process, the individual will still have only 12 mortgage payment within one year.
Side business? What about real estate?
grandma
Well-known member
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...lumping as many tax deducts into one year as can helps, naturally. As mentioned above, if you see this year's income is going to be considerably higher, then make more tax deductable payments this calendar year; including January's mortgage. There are also medical type things: look ahead & get as many as can into one paticular year. . It stillis effective only if you can manageby only having these expenses every other year.Don't forget what extramight be allowed into the IRA. I recall a close friend who wanted to deduct a home business, but one of the requirements for his wife's particular job was a direct entrance that didn't affect the living quarters. and, Importantly, don't miss out on your tithes & offerings ......
As Rolo & Tom said : read, read, read -
michelleunit
New member
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i would also like to know about home business deductionsfor real estate rental...i use my computer, fax machine, scanner and office at the house. not to mention office supplies, and hard copy files. or is it even worth the effort for one rental?
michelleunit
grandma
Well-known member
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michelleunit, at tax time I turn in an approximate amt of time I have spent related to the duplex. Supplies, etc, I split. First question I ask would I have purchased this if I didn't have the rental. Then of course, any traveling time, car expense gets listed to. Since I don't do my own taxes, I just give my Accountant the mileages, the amount of money, the guestimated amount of time. He does the rest. This year I have a lot of repairs & maintenance receipts to turn in too, the mileage includes going after the suppplies, shopping for the `right' carpet, etc.
I realize your quesiton is really about utilizing Home Business Deductions. I don't use a `home business' as such, d/t the percentage of time I use for `the business' does not qualify me as a home business, nor ismy `office' open to those who I do business with. (..with whom I do business !!)
I must qualify this to say, that my accountant didn't tell me that - I `just figured' that would be it.When relative moved oo the bank building , she tried to gether Loan Arranger business classified as `home', but they didn't have a definate entrance into the room they would be using , which was simply their joint office/computers room; there were other restrictions, too.
Someof the other members will reply soon w/information more appropriate to what you are asking !!! :^michelleunit
New member
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thanks for bringing some clarity to my question. i think i'll not mess with it as i only have one rental property (at present). what i haven't ever done was logged time. i've logged mileage for trips. we've had to go looking for different items at different times, and never thought to log that time. how does one figure a dollar amount to that? thanks for your info.
michelleunit
grandma
Well-known member
imported post
michelleunit wrote:
I figure my time is worth at least what I get paid at work. But I really just leave that up to my accountant .........??...and never thought to log that time. how does one figure a dollar amount to that? thanks for your info.
michelleunit
Pyiel ??michelleunit
New member
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Rolo-thanks-i'll check it out...i must've skimmed the earlier post and missed it!
michelleunit
pyriel
Active member
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Here is my take on taking deduction during tax time... Take as many as you can. People have this notion that the IRS is almighty and they will come over to your home and take everything just because you reported some deduction in your tax return. As any government entity, they are understaffed and overworked. Additionally, the burden of proof is on them to tell you that you are not allowed to deduct a certain item in you return.
Go ahead and deduct your computer, desk, toners, papers,etc. etc. The worst that can happen is for the IRS to tell you that you can't deduct them. That is all they can do. Yes, you might have to return some of the tax return if you overpaid your taxes but so what. By the time they get to you, a year had passed (and you can even delay that longer) and you already put that money to good use. Michelleunit, I am going to concentrate on you since I have some info on your rental unit.
Your rental income is $9600 per year. Your job is to make that dissapear. This is what I love about running a business, you spend your money first and whatever is left is your taxable income. If you end up spending more, they will give you a credit back. Don't you just love that? You can't do that with earned income where Uncle Sam always get paid first. With other deductions such as interest paid, insurance property tax, mgmt fee, depreciation you are coming up to about $9527. This means that your taxable income for the year is $63.
Hey, why stop there. What about your repair, the tax preparer's fee, your computer, desk, paper, filing cabinet, printer, tax program, tax preparer's course? They can all be deducted as well. Some will say that you can't deduct a computer and printer for your business. I say that is hogwash. You should be able to deduct them even if you only have one rental unit. I guess you really will not know if they are deductible or not unless you actually try deducting them. The IRS will tell you later if you can't deduct them and even if they do you can fight them for it.
Ok, lets say I was wrong and the IRS came back to you and said you can't deduct the 1k computer and $300 printer. Does this mean that you have to pay back $1300 to the IRS. NO! In schedule E, you will just deduct the $1300 from your total deductions. So if they take your repair, tax preparer's fee, paper, filing cabinet, tax program, tax preparer's course, etc... You will still have a negative cash flow in paper. You will then take that new amount and bring it to part 17 of 1040 (longversion) and it will change your AGI. Remember, the rental unit is just one aspect of the whole tax return 1040. Your AGI should have been lowered considerably if you max out from your TSP.
Besides, with computer and printer, you really can't deduct $1300. You have to break them down to 5 years due to depreciation. So the most you can deduct per year is $260.
Bottom line: Deduct as much as you want. Let the IRS come back to you and tell you that you can't deduct them. If they don't say anything, then you just have to keep your file for five years and that should be the end of it...
pyriel
Active member
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Michelleunit,
I forgot where is your rental located. Why don't you take a vacation and swing by your property. Once you are there, take a rental car. They are also tax deductible under Schedule E. Of course if your vacation takes you to Jamaica and your property is in Florida, the cost of the airfare roundtrip from Dallas to Florida and backis the only thing you can't deduct. The good thing about this is you can do it every year....
p
pyriel
Active member
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For the military folks... Do you have to go to PT 5x or 3x a week? What about when the 1SG tells you that you have to report somewhere else for formation. What about when your superior tells you that it is mandatory to attend a function. The IRS allows you to deduct your mileage for those trips that you making. How do you do it? Just keep a log book in your car. Write down, date and time, starting and ending miles of your trip, and reason for the trip. You'll be suprised on how much mileage you accumulate within one year. With the gas rising, I think we can all use whatever we can to lower our taxes...Similar threads
