Nobody likes paying taxes, so the procrastination factor when
preparing them tends to be high. But the good news is that there
are some things you can do now that will help you prepare for
next years taxes. Here are seven great tax saving tips so that
you can keep more of your hard earned dough!
1. Pay your January 1st mortgage payment a day early. If you
mail out your mortgage check on December 31st, the interest
deduction for that month will be good for the current year. This
is true even if the check doesn't get cashed until after the new
year.
2. Make a last minute donation. Under that same philosophy,
consider putting any last-minute charitable donations on your
credit card (for those that will allow it) on or before December
31st.
3. Defer that income one more day. This works with investments
as well as earned income. If you get a year end bonus, request
that it come in January rather than in December. If you are self
employed, you can do all your billing at the end of the month so
that the payments will come in after the first of the year. In
regards to investments, some will allow you to postpone paying
taxes until a later year even if the income is earned this year.
4. Look for every available credit and deduction. This tax
saving tip seems obvious, but people miss deductions and credits
that apply to them all the time. A credit is a dollar-for-dollar
reduction in any amount you might owe, so the effects of having
one or two of them on your return can be dramatic.
5. Donate your old clothes and furniture to your favorite
charity. Cleaning out the attic, the closets, that spare room,
and the garage is not only purifying but will help to decrease
your taxes. Put everything together and then take the load to
your favorite charity or charities. Make sure to get a receipt
for your records. The wholesale fair market value of the items
you donated is allowed as a charitable deduction.
6. Give your kids a job, in other words, put them on the
payroll. If you have kids, and they are over fourteen, you can
have them do some work for you around the house and pay them on
a part time basis. That will allow you to shift some of your
income that would be taxed at a higher tax bracket to their
lower tax bracket. However there is one warning; watch their
earnings because they will be considered when they get ready to
go to college and their financial aide could be affected.
7. Invest in your children's names. Your kids can each earn up
to $700 in investment income without paying any taxes if they
are over fourteen.
As painful as taxes and any related thoughts of them can be, by
following these great tax saving tips, you will save money this
year--and the next. One final tip; don't procrastinate until the
last minute! Preparing for your taxes year round will force you
to keep your eyes open for saving possibilities, and will likely
reduce your tax bill even more!
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