Last Tax Season Still Got You Down?
After a potentially brutal tax season a couple months ago, you might be left with a scar on your wallet and a stray tear rolling down your cheek as you remember the pain, now pleading for an answer to your question, “How can I reduce my taxes before next year??”. Luckily this is a great question with many answers!
The first thing which is good to remember is that, this is Your money, not the government’s. Secondly, the tax law is written about 99% to reduce your taxes, believe it or not. With about 5,800 pages making up the complexity that is our tax law, about 30 pages are specifically for raising taxes; and the rest of the 5,770-some pages of confusion are for reducing taxes and helping us out.
Many of us, including professional tax accountants, fear taxes and being audited. At least on the professional side, once you know the rules of the game, there really is nothing to be afraid of. “Ignorance breeds fear” they say. It’s vitally important then to have a tax advisor on your team that is confident, motivated, and even excited to save you as many of those hard earned dollars as is legally possible!
Tax Reduction Strategies
Depending on your personal situation, there are many, many things you can do to significantly lower your taxes. What were those rumors about some big business owners not paying very many federal taxes? I certainly can’t tell you if they’re breaking laws or not, but most of what they do is likely part of a very intelligently built strategy that has expanded tenfold over the last ten or forty years.
The two best categories that will help put your money back where it belongs – in your pocket, or your kid’s education – are making it deductible as you spend it, and using retirement plans and investments that act as tax shelters.
For job-related mileage your boss doesn’t reimburse you for, the government will allow a 2017 deduction of $0.535 per mile. If you have a second job, you can also deduct the miles driven between job one and job two.
There is another way to calculate this deduction which is a bit more complex, but worth it if it ends up being more of a deduction. Calculate the business portion of all of your car’s expenses incl. insurance, gas, repairs/maintenance, and depreciation.
You can also deduct the miles put on your car for volunteer work or charitable gifts, including meetings, fundraisers, and parking, toll fees, taxi fees, etc.
Job related education expenses
I personally love this one and use it. Education that can be deducted has to meet at least one of the following:
- It’s required by your employer or law and must serve a business purpose
- It maintains or improves skills needed now
It is not qualified if it’s needed to meet the minimum educational requirements of your present job or new job.
- Books, supplies, lab fees, etc.
- Some transportation and travel costs
- Other expenses like research costs
Setting up a retirement plan that includes tax shelters will help you now and in your future. Max out your IRAs for immediate tax deductions. 401(k)s are no longer the best option, but if you have one of these, again, max it out every year especially if your employer matches. If you have a Roth IRA, these contributions are your after-tax dollars so when you withdraw after age 59 ½ they are tax free ie. they grow tax free. So if you plan on having a nice chunk to enjoy in your golden years, you certainly won’t want most of it being taken by taxes!
If you’d like an experienced tax advisor to create a new strategy for you that can save you and your business some of your hard earned money, contact D&M Accounting and we’ll be happy to see what we can do!
We also offer payroll management services for all your paycheck processing needs.