These are some tax strategies frequently overlooked by many tax
preparers. Keeping up with the many tax law changes that are
made each year is quite a job. You can help yourself and your
accountant by making yourself familiar with how some of these
fairly simple strategies can reduce your taxes, sometimes by
thousands of dollars each year. The key to staying out of
trouble with the IRS is consistent documentation. These
strategies can be used even if you don't claim the home office
deduction on your home.
Tax Tip 1 Reduce the taxes withheld by adjusting the number of
exemptions on your w-4 form. Avoid getting a large refund each
year; you are simply making an interest-free loan of your money
to the government. If you need help saving, set up an automatic
withdraw from your paycheck into a money market account and earn
some interest.
Tax Tip 2 Writing off family medical expenses This strategy is a
little more complicated but well worth the extra effort. Our
family saved by deducting over $5,000 in out-of-pocket medical
expenses from our home business income last year. With two kids
in braces and an unplanned surgery, medical expenses can add up
quickly. ·To use this strategy, first, you must hire a spouse or
other trusted family member to work for your home or small
business, full or part time will work. ·Next you need to set up
and sign a medical reimbursement plan. You may need the advice
of an accountant to help you with this. This plan allows any
sole proprietor too convert all family out-of-pocket medical
expenses into legitimate business deductions ·Finally, your
spouse or family member pays all out-of-pocket medical expenses
for the family keeping receipts and documenting miles driven for
medical purposes. At a specified time, your business reimburses
your spouse or family member for these expenses and deducts them
as a business expense.
Tax Tip 3 Writing off your Child's College Education Expenses If
you put your child on the payroll of your business for
performing office chores etc., you can pay each child up to
$4,400 a year (2001) and that amount will be canceled out by the
child's own standard deduction. Your child can pay for or save
for their college education with the deductible wages you pay
them, and there will be no payroll taxes for your child under
age 18.
Tax Tip 4 Deducting auto mileage to and from your job. Do a few
minutes of work for your home or small business before you leave
the house for your job and when you return to your house after
work. Document this activity (a few email messages, letters, or
phone calls) each day in your day planner, journal, etc.; and
also keep a written record of your mileage. This allows you to
deduct this mileage as miles between jobs, (34.5 cents per mile
for 2002).
Tax Tip 5 Deducting Vacation Travel Expenses. Try to combine
business (a meeting with a client or possible client, checking
out some material or resources for your business, etc.) with
your vacation travel. As long as your trip is documented in
advance showing an intent to, in some way, build up your
business, your travel expenses become business expense
deductions. Meals, hotel rooms, plane tickets, car rentals, even
certain expenses for entertainment are deductible as business
expenses with proper documentation.
Tax Tip 6 Deducting phone, internet service, and utility bills
If phone calls, Internet service, or utilities are used for
legitimate business purposes, then, with proper documentation,
they become tax-deductible business expenses. If you have a
credit or debit card solely for your business, and you probably
should, the annual fees and interest payments are also
tax-deductible business expenses.
Tax Tip 7 Cutting your taxes when selling appreciated assets
When you are planning to liquidate appreciated assets such as
stocks, give them to your child or other trusted family member
in a lower tax bracket than you. When they sell the assets, they
will pay taxes at their lower tax rate. Another excellent method
is to donate your appreciated assets to your favorite church or
charitable organization. You are allowed to deduct the full
value of the assets as a charitable contribution, and neither
you nor the organization will pay any capital gains taxes on the
assets.
It would be advisable to consult a tax professional or
accountant for proper planning and documentation for some of the
more complicated tax strategies, but using these strategies
could save you thousands of dollars in taxes. Next time we will
take a look at some of the less familiar tax strategies useful
for the individual and family.
Article by: Naomi Knudsen Do you like to SAVE on shopping,
medical bills, taxes..? http://ahealthyyou.tripod.com
About the author:
Webmaster of Healthy Living at:http://ahealthyyou.tripod.com I
like to save money like some like to shop or collect antiques.
|
|
