Deductions

End Of Year Tax Tips – Save Money On Taxes By Donating Clothing and More

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As the end of the year races toward us, the opportunities to find and take advantage of tax deductions and loopholes to save money on income taxes are growing scarce. Fortunately, there are still plenty of tax saving strategies that you can implement even with just a few weeks to go until the end of the tax year. One of the most effective ways for typical households to lower their tax bill is by donating items to charities. Unlike cash donations, donating used goods to charity is a free way to reduce the income taxes you pay. A quick trip to the basement or storage closet could turn up several trash bags worth of used clothing that no longer fits your children, or you. Other items like shirts, pants, suits, jackets, shoes and more may just be out of style, or no longer fit your current dressing manner. For example, workers who used to have to wear a suit and tie to the office may now work in a business casual environment. Unless you live on the East Coast, suit and tie occasions don’t come up all that often. Hold onto one dark suite for funerals and formal weddings, and …

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More Tax Deductions for Small Business Owners and Sole-Proprietorships

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A great tax saving strategy, particularly for higher-income taxpayers is to start a small business. Many expenses that are not deductible for regular Federal Income Taxes are deductible to a business. For example, the mileage deduction is not deductible for personal driving purposes, and mileage driving to work is also not deductible. However, mileage driven for business purposes is tax deductible. While starting a phony small business is not a good idea, no matter how big of tax savings can be achieved, there are many legitimate businesses that people can start. The key aspect of being legally considered a business for tax purposes is that there must be a profit motive to the activity. That profit motive must outweigh other reasons for engaging in the activity, otherwise, the enterprise could be considered a hobby instead of a business. Formally incorporate the business with the Secretary of State in your state. Set up a LLC, it makes a great business structure for single-owner small businesses and is typically cheap and easy to setup. Filling out an online form and paying a registration fee is usually all that is required. Then, get an Employee Identification Number, or EIN from the IRS. Unofficially …

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End of Year Tax Strategies – Calculate Dollar Amount of Tax Moves

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Ah, November, when the American mind turns toward Thanksgiving, Christmas shopping, and strategies to avoid paying too much taxes. Yes, you should be doing tax planning year round to achieve the maximum savings on taxes, but reality isn’t always so kind. Still, there are some end of year tax moves that are smart and some that just aren’t worthwhile tax strategies when you add up your tax savings. Figuring out which is which is a critical part of personal finance. To avoid making tax moves that aren’t worth the trouble, there is a simple strategy. Always calculate the real dollar amount of any tax strategy prior to implementation. Tax Savings Strategy Example #1: The Top 10 End of Year Tax Strategy Tips lists always include the barely usable advice to pay your January mortgage early. By paying your January mortgage bill in December, you get to deduct the interest from your payment in 2009. There is a big, fat catch, however. Although you do get to deduct 13 months worth of mortgage interest in 2009, you will only get to deduct 11 months worth of interest in 2010 unless you make sure to make that January payment in December again …

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End Of Year Federal Income Tax Advice Tips and Tricks

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Here they come.  Articles, columns, emails, and websites by the dozens (hundreds? thousands?) each offering tax advice in the guise of tips and tricks while actually offering up nothing more than the same old retread of a supposed gold mine of tax savings. This is the true, cold, hard fact: There is virtually nothing you can do to lower the amount of taxes you pay on earnings that come in the form of a steady paycheck.  Sorry, but it is true. Tax Advice and Tips and Tricks So, what exactly is in these so called advice articles?  Mostly things that will not apply to most people, or nickel and dime savings that won’t make much of a dent.  But, tax advice articles are popular, especially at year end.  Let’s take a look at the most common advice. Pay Your Next Mortgage Payment By December 31 – This doesn’t lower your taxes so much as borrow a deduction from next year’s taxes.  The idea is that by paying your January 1st mortgage payment in December, you get to deduct 13 moths worth of interest, instead of 12.(Mortgage payments used to be due on the 1st of the month, that isn’t always …

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