There really are no tax tricks. There are only taxable items, non-taxable items, and tax deductions. The trick to lowering your taxes is to make sure that you make all three categories work for you.
One area where many people could use a tax tip to lower their taxes is in the realm of tax deductions. You see, most tax deductions are simply set in stone, either you get them or you don’t. You really can’t go around trying to get them. For example, going to college to get a college tax credit doesn’t make any sense. If you are going to college, then of course you would claim the credit. But, that is the point, either you already are getting it or you are not. There is no trick.
The exception to this rule, is owning your own business. With your own business, you get to file a Schedule C and on the Schedule C, there are litterally hundreds of things that become tax deductible that are not deductible on your taxes anywhere else.
Too late to start a business to lower your 2008 taxes?
Technically, yes, but that doesn’t mean there is no money saving tax trick here. Look back over your 2008 and see if there is somewhere where you can demonstrate a legitimate profit motive. That is, is there activities that you engaged in during 2008 that you could legitamitely look someone in the eye and say, “I did that to make money.”
If so, then you have a business. Combine all of those up into a single grouping, and maybe you even have a profitable business. Now, virtually everything you did in order to make money on those activities, from purchasing new office supplies or equiment, to milage driven to look at something you needed, to meals eaten out with others who could help make your business profitable all become profitable.
Don’t worry if you were not profitable in 2008. Most businesses are not profitable in their first year. In fact, most businesses are never profitable because 2/3 of them fail within the first three years. That doesn’t mean you can’t claim your deductions.
Obviously, I can’t cover every detail here in just 500 words, but the most important factor is that your business must have a profit motive. That means that you have to be trying to make money at it. Just making money on accident doesn’t count. But, if you are fixing up old toys and selling them on eBay for more money than you bought them for, that is a profit motive. And you can deduct every expense associated with it, from shipping, packaging, to tools, supplies, advertising, even all the costs associated with your web site or Paypal account.
You don’t even have to have kept receipts since many of those expenses are probably waiting for you in your email inbox as invoices and bills, plus your Paypal account history. Also, check your credit card statements.
Print them all off, stick them in your tax folder, and fill out a schedule C. Who knows, you could save hundreds or thousands of dollars on your taxes for 2008. And, as a double bonus, it might save you money on your 2009 taxes too!
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