Tax TipsThis page of Tax Tips will grow and change over time due to the never ending tax law changes that are handed down to us from our government. The site visitor is advised to check with their own tax professional to see how these tips affect your own situation. Very often, a simple recognition of a new law or loophole will allow you to pick some more dollars off of your money tree while missing these tactics will have these "dollars" ripe for picking, wasted and fall to the ground. O.K. here we go:
1)When deciding where to place your purchased securities in a taxable account versus a tax advantaged account like an I.R.A., you need to be mindful of the current tax implications. For instance, Bond interst payments to you are taxed at ordinary income rates (up to 35%) which is usually higher than long term capital gains rates (15% right now but is scheduled to go to 20% in 2011). Therefore you would place taxable bonds in a tax-deferred account and you would place equities in a taxable account. In the case of Tax-free municipal bonds, you could place them in a taxable account due to their tax free nature.
2)The final quarter of the year is a good time to "harvest" investment losses. If you have gains in your portfolio that you have to pay tax on, this is a good time to get rid of your losers to offset the gains. You can offset all your gains with losers plus an extra $3,000.00 more. If you have even more than that in losses, the overage over $3,000.00 is carried forward to use the following year. If you are in love with some of your beaten down securities and really feel strong for their future, sell the security to reap the loss and wait 30 days to buy them back on day 31. If you buy them back before this waiting period, the I.R.S. will disallow the deduction with the so called "wash sale" rule. That's their way of saying "no way" you cannot sell a security to capture a loss and buy it right back to pick up where you left off.
3)People get into trouble trying to use a home office deduction simply because they do some work from home. The I.R.S. is very clear on when you can deduct a certain percent of your overall home expenses to reflect the "office" portion of your home. Basically you need to be self-employed and this has to be the primary place where you meet and deal with clients/patients. This deduction is so often misused that it often triggers an audit.
4)Thanks to President Obama, first time home buyers that close on a home purchase between Jan 1, 2009 and Dec 1, 2009, will receive an $8,000.00 refundable credit on your next tax return. If your return is less than $8,000.00, you will get the smaller number refunded. Some restrictions apply so be sure to check with a tax professional.
5)For you lottery players, did you know that you can deduct your gambling losses...but only to the extent of your gambling wins, so keep good records especially if you like to go to Las Vegas
6)Some people like to keep records for seven years, some 10 years, some forever. In realty, the I.R.S. has up to three years to audit you but you should keep your records for 6 years because that is how far the I.R.S. can go back if they feel you underreported your income by 25% or more.
Stay tuned for more tax tips as they arrive all the time. In the meantime, you might like to take a look at the following publications:
How To Legally Save On Taxes
Last but not least, you could also check out Google Search! for Tax Tips.
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