If you are the sort of person that likes hot tips about anything, you’ll certainly take pleasure in the tax tips in this article as they will help you to attain the financial freedom that eludes so many people. Be forewarned that since tax laws are constantly changing, tax tips should also constantly change due to the never-ending tax law changes which are handed down to us from our government. The reader is advised to check on with their own tax professional to observe how these tax tips affect their own situation. Often, a straightforward recognition of a brand new law or loophole will allow you to choose some more dollars away from your cash tree. Of course, if you don’t make the most of these tactics, then your “dollars” ripe for picking is going to be wasted and fall to the ground. Today’s tips include:
1) If you are deciding where to place your purchased securities such as in a taxable account versus a tax-advantaged retirement account you must be mindful of the current tax implications. For example, Bond interest payments that you receive are taxed at ordinary income rates, up to 35%, which 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 the case of tax-free municipal bonds, you may place them in a taxable account due to their tax-free nature.
2) The ultimate quarter of the year is a great time to “harvest” investment losses. When you yourself have gained in your portfolio that you have to pay for tax on, that is a great time to eliminate your losers to offset the gains. You are able to offset your entire gains with losers plus an extra $3,000.00 more. When you yourself have even a lot more than that in losses, tax tips the total amount over $3,000.00 is carried forward to utilize the following year. If you are deeply in love with some of one’s beaten-down securities and really feel strong for his or her future, sell the security to reap the loss and wait 30 days to get them back on day 31. If you get 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 protection to fully capture a loss and buy it back to pick up where you left off.
3) People enter trouble trying to utilize a home office deduction simply because they do some work from home. The I.R.S. is specific on when you can deduct a specific percent of your current home expenses to reflect the “office” portion of one’s home. Basically you must be self-employed and it has to be the primary place where you meet and deal with clients or patients. This deduction is so often misused that it often triggers an audit.
4) For the lottery players, did you understand that you can deduct your gambling losses… but simply to the extent of one’s gambling wins, so keep good records especially if you like to go to the casino.
5) Some individuals like to keep records for seven years or more. In fact, the I.R.S. has up to three years to audit you but you ought to keep your records for six years because that is how far the I.R.S. can go back if they think you underreported your income by 25% or more.
As mentioned earlier, tax laws are constantly changing so it’d behoove one to be cautious about future tax tips as your financial freedom is going to be dependent upon it.