What's the best way to lower my taxes?
What type of deductions can I take?
Best Answer
2082 points
alanj answered one year ago …
By itemizing deductions on your Federal Tax Form 1040 you can deduct things such as medical, educational, business related moving expenses, travel expenses for volunteer work, bad debts on monies owed to you which you are unable to collect on, etc. The best thing you can do is to go through a 1040 long form and try to figure out what kind of deductions you can take in your particular situation. If that turns out to be to complicated (which it can be) talk to a tax advisor. Keep receipts as proof of expenses incurred (for the deductions you take). Note: If considering giving to charity make sure it is a licensed non-profit organization. If you stick with a national reckonizable name or a local church you'll be ok. Because, there are people who do present themselves as non-profit when they're not.
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904 points
jillybeansisme answered one year ago …
Adopt a special needs child and get the $11,389 tax CREDIT (of course, that's not the reason you adopt, but it sure is a nice perk). If you aren't in a position to add this joy to your life, you could include munis in your portfolio, sell losing positions, add to your 401K and IRAs, make charitable contributions to worth causes (make sure you check into how worthy they really are and that they are legitimate).
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381 points
SirCrashton answered one year ago …
I agree 100% with jillybeansisme. I would rather direct where my charitable contributions go than to give my money to any government entity and let it decide what wasteful purpose(s) to use it on. As jilly suggests, check the organizations and find out what percent of your dollar actually goes toward helping poeple or whatever cause you support. (Most of the money spent on the "War on Poverty" was used to fund the bureaucracy set up to run the prorgams.) I normally receive a tax refund every year but without deductions for charitable causes I would owe additional taxes.
With regard to personal income and capital losses, you are limited to losses of $3000/year. Additional amounts have to be carried over into future years.
4085 points
EthanR answered one year ago …
Good suggestions above. Here's one more. Turn a hobby or pastime into a business. The IRS allows you to lose money on a business for two years. If the hobby is something you normally spend money on, by turning it into a business, you are allowed to deduct purchases or services that are related to the business. For example, if you sell things on line, your computer related purchases and internet connection which you would normally not get a deduction for, would become fully tax deductible. Depending on the type of business, you may even be able to deduct a percentage of your automobile use.
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951 points
Grudun answered one year ago …
Finding deductions is great. But remember not to incur an expense JUST for the tax deductions. If you spend $1 for a $1 tax deduction(without other redeaming factors like giving to a good cause) you only save about 35 cents in taxes resulting in a net loss of $0.65 for each dollar of deductions, not the best investment.
But if you are looking to reduce taxes try to avoid selling stocks for short term capital gains if you have already held them for most of the year and a day holding period.
142 points
RobertW answered one year ago …
Good answes above. My advice is be happy that you have to pay taxes on capital gains, at least. Do not hold a stock because you don't want to pay the tax on gains. After 2000 and 2001-2 when I lost my shirt and had write-offs fro the next 2 years, I am happy to pay taxes. If you are close to a year for holding the stocks, but believe it may go down, you can buy a put for the time remaining for the holding to become one year. Good luck and pay, pay,pay, and sell, sell, sell, if Obama is elected.
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