Tax Saving Strategies for Individuals
Copyright Robert Lee Riley, all rights reserved, do not duplicate
without permission of author.
...go to page one and down load the Tax Data Organizer for a
detailed list of tax saving ideas.
...I recommend that you use QuickBooks. Charge everything, or
use a debit card. Sign up for the travel mileage credits. Post your
expenditures monthly directly off the card statements and your
checking account statements. Quicken VISA automatically
downloads to Quicken/Quickbooks. Use the account categories
as shown on my Tax Data Organizer.
...if you have a very low income year, you may want to roll over
your regular IRA to a Roth. You have to pay tax on the rollover but
it can be worth it in the long run.
...IRA contributions are due April 15th.
...contribute to a spousal IRA for your spouse who does not work.
...if you are in a pension plan at work you can contribute to a
nondeductible IRA, or a Roth.
...take $10,000 out of your IRA to purchase a first-time home.
...accelerate capital losses and delay capital gains.
...adjust your stock/mutual fund sales to maximize capital gain
treatment. The capital gain holding period is one year.
...when you sell shares of stock, or a mutual fund, notify your
stock broker, or mutual fund company, and sell the most recently
purchased shares. Those shares will probably have a higher
cost basis and the gain may be less.
...use the gift tax exclusion to shift income to your hiers.
...invest in treasury notes and bills because the income is free
from California tax.
...consider tax exempt municipals only if your income is high.
...keep track of mileage driven for job hunting, business,
medical, and charitable purposes. Use your appointment book
or Palm Pilot.
...use a home equity loan instead of credit card debt because the
interest is tax deductible. Purchase your car using a home equity
line of credit rather than a bank loan, if possible.
...deduct your away from home travel expenses for business and
...deduct entertainment expenses for job hunting, networking,
business development, and investment. If you "live to work" then
many expenses which at first may appear to be personal in
nature, may be perfectly legal tax deductions.
...the IRS does NOT require receipts for expenditures less than
$75. Still, record such amounts contemporaneously in your
...you do NOT have to record every business mile you drive. You
may, for example, estimate your auto usage once a quarter and
prorate it over the entire year.
...use your PDA or appointment book to substantiate auto usage.
Post it as often as you can.
...employment tax returns may be required for child care in your
...interest on a boat or mobile home may be deductible.
...travel for investment purposes, such as looking at real estate,
is deductible if you spend more than 6 hours per day - gather
brochures, business cards, maps, etc.
...the rules for vacation/business travel and job hunting are
complex - see my Tax Data Organizer, page 6.
...meals eaten alone when travelling are deductible (for
...lost your receipts for travel meals? Take the IRS daily
...buy a car or truck that weighs more than 6,000 pounds
because the depreciable life is 5 years instead of 20 to 30 for
...never trade in a car. Instead, buy and sell in separate
transactions even if it is with the same dealer. You can then write
off your undepreciated cost basis.
...rental property that you own and manage yourself is still one of
the best tax favored investments.
...interest on a boat or mobile home may be deductible if there is
living space - the second home rules apply.
...expenses paid for with a credit card are deductible in the year
you make the charge, not in the year of payment. So look at your
January statements for December charges.
...do not forget to deduct casualty and theft losses even if the
property is personal.
...you can lower your audit profile by extending your tax return and
filing after April 15th. The IRS system often becomes overloaded
later in the summer and they are less likely to pull your return for
...donate appreciated property (e.g. stock) to a charity, and some
schools, and take a deduction for the fair market value of the
property. There is a one year holding period rule.
...mortgage points - new home; deductible, refinance; amortize
over the life of the loan, but write off any unamortized points.
...if you have a boat or swimming pool, or you are giving a party,
deduct the variable costs of the event. If 4 of 10 people are
business associates then deduct 40%.
...in some cases, you can borrow against your 401k, or pension
plan, and purchase a home.
...the gain on the sale of your home is tax free up to a point;
$250,000/500,000 (single/married) subject to the 2 of 5 year
rule. Excess gain is taxable so keep receipts for home
improvements made over the years of ownership.
...hold title to your home as community property and receive a
joint step up in basis from the decedent.
...do not believe a car salesperson who tells you that leasing
has tax advantages. Remember, you pay sales tax on the lease
payment so sometimes it costs more. Add up the net cash
outlays over the term of the lease and compare to the net cash
outlays for purchase over the expected holding period. If you pay
a large lease deposit, it is written off over the term of the lease -
not up front.
...annuities grow tax free - but invest in annuities only after you
have maxed out on your IRA and pension contributions.
...if you have an IRA, or pension plan, you need to review the plan
documents and properly designate a beneficiary.
...to be continued as time permits, check back.
Cell: 415 308-0678
Fax: 415 704-3238
1001 Bridgeway, #229
Sausalito, CA 94965
Conference room locations;
|Robert Lee Riley CPA, MBA-tax