Good Grief! Time to Start Thinking About Taxes Already?

Time flies! Here we are at the end of the year and for most individuals, it’s the end of the tax year.

A Dutchman was explaining the red, white, and blue of the Netherlands flag to an American. “Our flag is symbolic of our taxes. We get red when we talk about them, white when we get our tax bills, and blue after we pay them.”

The American nodded. “It’s the same in the USA only we see stars too!”

epsilonYep, it’s always wise to think about reducing your tax liability and about taking actions to insure that you’re prepared when tax time comes around. Just as a business’s largest expense is usually labor, my largest expense (and probably yours) is taxes. Just this past year, the US economy spent 30.8 percent of its income on our tax burden (Federal, state, and local), more than food, clothing and housing combined according to The Tax Foundation.

How do I do MY taxes?

I use TaxCut from H&R Block Premium + State + E-File and have for 12 straight years. But this year, I’ll be using the TaxCut Online version. With it, I’ll be able to prepare and e-file both my federal and state return with just one program at the same time! Not only that, but I will also get one “Ask a Tax Adviser” session included and get H&R Block’s “Worry-free Audit Support” by using E-file. Simply put:

I trust TaxCut from H&R Block.

Here’s some year end tax saving strategies I plan to use

1. Review and potentially increase my spending in tax deductible areas.
There would include medical expenses, mortgage interest expenses, interest on student loans, un-reimbursed business expenses, or other related tax deductible expenses. If there’s anything that I can afford to pay in those areas, it makes tax sense to do it before year end.

2. Make a contribution to my Roth IRA.
The beauty of the Roth IRA is, though my contributions are not tax deductible, by making contributions with after tax money, all the growth accumulates tax free (under current laws).

3. Deduct expenses associated with my hobby … blogging.
If you have a hobby that brings in a small income, start treating it as a business. I can come up with considerable losses to offset my very small blogging income. I will treat it and file it as a small business to offset my other income.

4. Make some donations of cash and non-cash items.
We usually donate some cash and some clothing to various charities at this time of year and I see no reason for that to change! We just donated a 5 ft chest freezer to my church and we have a lot of used clothing we can donate to Goodwill. Hey! Every deduction counts!

The easiest way to build real wealth is to keep more of your own money. That means giving the IRS only what it expects when it expects it, and no more. So take some time to organize your finances, to understanding the truth about the IRS and tax deductions, and to know how to protect your assets from over-taxation. It will literally save you thousands of dollars every year and help you maximize your money on the income you are already making.

[tags]blog, charity, taxes, finance, finances, income, money, ira, irs, savings[/tags]

photo credit: chadmiller

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