Business tax deductions can save you a lot of money. Here are some ways to plan for reducing your taxes next year.
Important note: the material provided here is for informational purposes only and is not professional tax advice. It is intended for our readers in the United States. Please consult a professional tax advisor to discuss your specific tax situation.
- Upgrade your assets. If you feel that you need to upgrade your computer or automobile, then now is the time to do it. This will get you a tax break next year – and depreciation will continue to give you breaks in future years as well.
- Hand out gifts. This is not to be confused with becoming Santa Claus, but you may be able to give stocks to your children, whose tax rates may be lower – thereby lowering your total tax liability. But first you’ll need to find out if your children have any other sources of income.
- Donate to charity. Okay, so now you can become Santa Claus! Since God and the taxman have been kind to you, you can reciprocate and donate some of your earnings in the form of cash, old furniture or an old vehicle.
You will get a tax deduction on that donation and enjoy the good feeling that comes from philanthropy.
- Plan long-term stock purchases. Purchase new stocks and plan to keep them for a long time. This way, you can avoid short-term capital-gains tax, and you can also receive dividends if the company you’ve invested in pays any. In addition to saving tax, you also have an investment that could appreciate a lot and lead to future wealth.
Similarly, you can also dispose of stocks that have become worthless and claim the loss as a tax deduction, somewhat softening the financial blow.
- Claim business expenses. Don’t forget to claim all expenses related to your business. File bills and receipts for every purchase including traveling, entertainment and meals, fuel, and even mobile phone expenses.
Make sure the deductions are legitimate, however. You don’t want an audit!
- Claim your loan points. If you are purchasing a home, then you can get a full deduction for the points charged by the lender. This might have to be claimed over a period of time, but can be significant over the long run.
- Start a retirement plan. If your employer has a retirement plan, then invest in it, because you will probably be eligible for deductions. If your income is low, then you may be eligible for a tax credit.
- Start a business from your home. If you have a consulting business or other business that can be run from your home, then do it. You will save tax not only on office rental fees and other overhead expenses, but you can also claim a portion of your electricity, insurance and water bills.
Don’t forget the home office expense deduction!
- Shift and save. If you have lived in your present home for more than two years and if it has appreciated, then you could sell it and buy another one. This will give you and your spouse big tax benefits – and you might also save some money if you get a better deal on your new home.
The decision to sell your home requires a lot of thought and the consent of other family members, since it is not just a business decision but also an emotional one.
When it comes to next years’ taxes, act now and save later. Happy Tax Saving!