In my last post of my Taxes Made Easier Series, I want to look a head. No matter what we may or may not hope for with respect to our taxes and no matter how our taxes come out in the end, the truth is 2014 ended on December 31. Other than getting them done, hopefully done easier, there really isn’t any more for us to do. But, if you are anything like me, I generally prefer to keep our family’s hard earned money. I know we can use it for so many other wonderful things. I’m no tax advisor and you should always consult a tax professional on your personal tax situation but am someone who likes to keep my family’s money. And basically that comes down to two major concepts:
Decrease Taxable Income and Increase Deductions
There are so many ways to do both of these and I’m going to touch on a few. However, I’m also including a link at the bottom that go over way more – including some that I’m seriously going to investigate with my accountant tomorrow!
Decrease Taxable Income
There are so many ways to decrease your taxable income and most people don’t take advantage of them.
Fund Your Retirement
By maximizing your contributions, especially as pretax dollars through your company’s retirement program, you are not only making sure you are saving for the future but decreasing your taxable income. This let’s you keep more of your cash.
One way you may want to look at for funding your retirement is through investment based life insurance programs. You can contribute more than a traditional retirement 401K and IRAs as well as when taken out at retirement, the money is tax free. Plus, you also have a nest egg of protection should something happen to you.
Think Medical…and Dental, and Vision, and Long Term Care
Besides the fact that everyone is now required to have medical coverage, it is also a great way to decrease taxable income. Premiums for insurance coverages taken out of your wages can be taken as pretax dollars. If you pay privately, then it is a deduction on your annual taxes.
Save for the Future
One you can save for the future is also medical related and also tax free – you keep the money. Look at potentially stashing extra money in Health Savings Accounts or Medical Reimbursement Accounts for future medical need use.
Work from Home
This once was exclusive to home-based businesses of the self-employed – which has TONS of legitimate tax deductions for. But now, even those that use their home for their business but don’t regularly meet with clients there can tap in to these one time exclusive deductions. By doing so you are lowering your taxable income.
Adjust what Uncle Sam takes each Month
Not really reducing your taxable income but along the same lines. If you find that you are receiving large refund checks each year, consider adjusting your withholdings so that you retain more of your paycheck each month. After all, tax returns are really the government just giving you BACK your money. Why let them have it in the first place.
Increase Your Deductions
This is easily said but only if you know what they are. This is were a tax advisor is crucial. They can look at your particular situation and help you maximize your deductions. However, here are 14 of the most missed tax deductions. And I can speak from experience as legal deductions for capturing income was a tax deduction our family missed.
Keep GREAT Records
Increasing your Deductions starts with great record keeping. As a home based business owner, I have become a master at this. I keep and label everything I know is a deduction and those I think might be. I always label a receipt or bill with how it was paid, the amount, date AND what it was for. I was even able to deduct some of my costs from a vacation to Hawaii because I ended up spontaneously talking Mary Kay shop with an acquaintance I made while there. And there are so many things that can be deducted.
Job Hunting Expenses
If you are one of many people in America that may have found themselves unemployed (meaning seeking a NEW job after losing an old), then your job hunt can be deducted. If overnight traveling, food, mileage, lodging, transportation and more can be deducted.
Give Things to Charity, Not Just Money
I am the queen of this since yard sales don’t amount to much around here – especially not compared to the deduction. Plus it is so much easier. As I spring and fall purge, I take my gently and kindly loved items to local charities that can use them. Not only do I get the deduction, but hopefully they can earn cash for their cause and someone else can get a good deal on something they need.
And speaking of giving things, consider giving appreciated stocks or mutual funds. The charity gets the benefit of the increased money from the stock and you can get the deduction for the fair market value at the time you donated it, even though it cost you less than the value. Don’t do this on a losing share as you will have paid more for the stock or mutual fund than you can deduct.
Save for College Tax Free
By using state sponsored 529 college savings plans, the earnings can become tax free. Plus, its an account that can migrate for anyone that wishes to use it for education. So if one child doesn’t attend higher education, use it for another or even yourself. Plus, you retain control of the account.
Moving…Tax Write Off
If you are moving or relocating for a job (or leaving a business to start your own), then keep track of you travel costs, your food, lodging and mileage along the way. If you are over 50 miles away from your old location, then you may have a valid deduction.
Medical Expense are EVERYWHERE
I know I said this was a way to decrease your taxable income but it is also a way to rack up some itemized deductions. Just like I said in my Taxes Made Easier: Know What to Keep for Your Records, there are so many deductions here.
Consider Going Green as an Option
If you have a home improvement project coming up or you are planning on purchasing a new vehicle, look at green options. Some home improvement projects are subsidized or offer rebates as well as tax credits or deductions on your income taxes. We installed some much needed new windows this last year and we will be seeing a tax credit on our income taxes. Green cars also can also offer tax credits and deductions. Something to think about as green options are becoming standard place as well as competitively priced in today’s market.
Have a Home Based Business
Having a home-based business, such as my Mary Kay business, allows for so many deductions. Each situation is unique but there are tons. I have gone to a wonderful spa and enjoyed some much needed pampering but because it was a part of my business – a work event – I was allowed to write off my mileage to get to and from, my meal there, and other items. As I mentioned earlier, I was able to write off portions of my vacation to Hawaii as a result of doing a little bit of business. But that is not all.
As a standard, home based businesses can deduct a portion of their mortgage, their utilities, insurances, etc. But instead of commuter miles, which only track mileage from their office to their work related event, home based business owner can track from their home to any where they do business – even if its a trip to the spa. However, the interest on a car loan, gas, oil and maintenance all can become valid deductions with a home based business. And that is just the tip of the iceberg of deductions that are available to a home based business. Since I previously kept many of my business items housed in my garage at my previous home and they needed to be insulated, I was able to deduct a new garage door one year. It was a legitimate expense but it was a great perk that it also made my house prettier.
As always, it is best to talk to a tax advisor so they can work with your specific situation. That said and since I can’t possibly cover it all, here is a link to a site where I found tons of out of the box thinking on increasing deductions and decreasing income so you can keep more of your money. Definitely worth running by your tax advisor. I know I will be.
And if you missed out on any of my series, check out the links below:
I hope it has been helpful as you prepare for the upcoming April 15th deadline. See you all next post.