Tax Tips You Need To Know For Your Financial Freedom
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If you are the kind of person that likes hot tips on anything, you will certainly enjoy the tax tips in this article as they will 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 due to the never ending tax law changes that are handed down to us from our government. The reader is advised to check with their own tax professional to see how these tax tips affect their own situation. Very often, a simple recognition of a new law or loophole will allow you to pick some more dollars off of your money tree. Of course if you do not take advantage of the following tactics, then the “dollars” ripe for picking will be wasted and fall to the ground. Today’s tips include:
1) When you are deciding where to place your purchased securities such as in a taxable account versus a tax advantaged retirement account you need to be mindful of the current tax implications. For instance, Bond interest payments that you receive are taxed at ordinary income rates, up to 35%,which is usually higher than the long term capital gains rates of 15% right now but could 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 could place them in a taxable account due to their tax free nature.
2) The final quarter of the year is a good time to “harvest” investment losses. If you have gains in your portfolio that you have to pay tax on, this is a good time to get rid of your losers to offset the gains. You can offset all your gains with losers plus an extra $3,000.00 more. If you have even more than that in losses, the amount over $3,000.00 is carried forward to use the following year. If you are in love with some of your beaten down securities and really feel strong for their future, sell the security to reap the loss 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 way of saying “no way” you cannot sell a security to capture a loss and buy it right back to pick up where you left off.
3) People get into trouble trying to use a home office deduction simply because they do some work from home. The I.R.S. is very clear on when you can deduct a certain percent of your overall home expenses to reflect the “office” portion of your home. Basically you need to be self-employed and this 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 you lottery players, did you know that you can deduct your gambling losses… but only to the extent of your gambling wins, so keep good records especially if you like to go to the casino.
5) Some people like to keep records for seven years or more. In realty, the I.R.S. has up to three years to audit you but you should keep your records for six years because that is how far the I.R.S. can go back if they feel you under reported your income by 25% or more.
As stated earlier, tax laws are constantly changing so it would behoove you to watch out for future tax tips as your financial freedom will be dependent upon it.
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