Saving on Your Taxes

It’s a part of life: taxes. While most Americans have no problem with paying their due, we all are looking for ways to reduce the amount we are called upon to pay at tax time. You can do this, the honest way, by following a few simple tips.

Make Your Taxable Income Smaller

You can legally reduce the amount of your taxable income, and it doesn’t involve doing any work “under the table” in order to avoid the tax man. Rather, you can take advantage of certain accounts through your employer. For example, you can have your employer deduct money from your account – before taxes – for things such as medical expenses and child care. For every $1,000 you put into one of these funds, you can save about $300 in taxes and you can contribute as much as $5,000 to a medical expense fund. Keep your eyes open in the fall when open enrollment for these programs takes place.

Get Rid of a Bad Investment

If you have a bad stock or fund stinking up your portfolio, sell it off to prevent further loss and offset your capital gains with your losses. So, although the investment may not have been a good choice, you can take advantage of a helpful tax break. If you change your mind later, you can buy the fund back.

Have a Giving Heart

Instead of donating cash to a charity, try donating some stocks instead. You won’t have to pay any taxes on the money earned by the stock and you can deduct the value of the shares on your tax return. Don’t worry about the paperwork, the charity will be able to help you out.

Start a Business from Home

If you start a home-based business, you can put a little extra cash in your pocket plus open up the door to a whole new set of tax deductions. Your Internet access, phone bill, and even repairs to your home may be tax deductible. Of course, there are certain restrictions and the space you are claiming has to be used exclusively for work. But, you will find that there are many expenses that will qualify for these additional tax breaks. Get a copy of Publication 587 on the IRS website at www.irs.gove to learn more about how to take advantage of that spare room in your house.

There are a number of loopholes and ways to save money when it comes to tax time. If you aren’t sure of what breaks you are eligible, see an accountant and have him or her help you determine what can and cannot be deducted and what other tax breaks you might be eligible for – then, take advantage of your ability to deduct the accountant’s fees on your tax return. If you are a do-it-yourselfer, visit an accountant one time just to be sure you are taking advantage of all of the breaks you are eligible for and then do your taxes yourself each subsequent year.