If you’re the sort of person that likes hot recommendations on anything, you will certainly enjoy the tax tips in this article because they can help you to reach the financial freedom that eludes so many people. Be forewarned that since tax laws are constantly changing, tax tips must also constantly change because of the never-ending tax law changes which can be passed to us from our government. The reader is recommended to test with their own tax professional to see how these tax tips affect their own situation. Frequently, a simple recognition of a fresh law or loophole allows you to select even more dollars from your cash tree. Of course, if you don’t make the most of these tactics, then your “dollars” ripe for picking is likely to be wasted and fall to the ground. Today’s tips include:
1) When you are deciding where to place your purchased securities such as for example in a taxable account versus a tax-advantaged retirement account you have to be mindful of the current tax implications. For instance, Bond interest payments that you receive are taxed at ordinary income rates, as much as 35%, that will be usually greater than the long run capital gains rates of 15% right now but may increase to 20% in 2013. Therefore you would place taxable bonds in a tax-deferred account and you would place equities in a taxable account. In case of tax-free municipal bonds, you may place them in a taxable account for their tax-free nature.
2) The last quarter of the entire year is a great time to “harvest” investment losses. If you have gained in your portfolio that you have to pay for tax on, this really is a great time to get rid of your losers to offset the gains. You can offset all your gains with losers plus a supplementary $3,000.00 more tax tips. If you have even more than that in losses, the total amount over $3,000.00 is carried forward to use the following year. If you’re in deep love with some of your beaten-down securities and experience strong because of their future, sell the security to reap losing 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 method of saying “no way” you cannot sell a security to capture a loss and buy it right back to get where you left off.
3) People get into trouble trying to employ a home office deduction since they do some work from home. The I.R.S. is very clear on when you are able deduct a particular percent of your general home expenses to reflect the “office” portion of your home. Basically you have to be self-employed and this has to be the primary place where you meet and cope with clients or patients. This deduction is so frequently misused that it often triggers an audit.
4) For the lottery players, did you understand as you are able to deduct your gambling losses… but simply to the extent of your gambling wins, so keep good records especially if you like to visit the casino.
5) Some individuals like to keep records for seven years or more. The truth is, the I.R.S. has as much as 36 months to audit you but you should keep your records for six years because that is how far the I.R.S. can return if they think you underreported your income by 25% or more.
As previously mentioned earlier, tax laws are constantly changing so it would behoove one to look out for future tax tips as your financial freedom is likely to be dependent upon it.Read More