Thread: Any tips on lowering TAXES?

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?

thinks wrote:

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?

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:

Does anyone do, for instance, a home side business to reduce taxes and care to add your two cents?

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

If you have a hobby that you can turn into a sideline business, do it! Another quick read on how to get started, by the same author, is Small-Time Operator.

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.

thinks wrote:

Does anyone do, for instance, a home side business to reduce taxes and care to add your two cents?

That is a real good idea. Charles Givens' book Wealth Without Risk has a lot of useful ideas on how to take advantage of that, tax-wise.

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.

thinks wrote:

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?

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?

...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 -

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

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 !!) :P 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 !!! :^

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

michelleunit wrote:

...and never thought to log that time. how does one figure a dollar amount to that? thanks for your info.
michelleunit

I figure my time is worth at least what I get paid at work. But I really just leave that up to my accountant .........??



Pyiel ??