How to Pay Less in Taxes

Steps

1. Start thinking of next year's taxes this year.
2. Get a box or jar and start collecting records for next year because the most important thing you can do to reduce next years taxes this year is KEEP RECORDS of anything that might be deductible.
3. At tax time you will need to sort those records into likely deductions. Only you know what sorts of deductions you might be able to take. But here are a few examples of deductions that might help you on your way.
   • • Have a child or support a disabled person. Dependents are a type of deduction.
     • Take a class. Going to college may be a deduction. Or you may be able to deduct the cost of classes you need for work.
     • Get a hobby. Your hobby or business (or hobby business) can give you deductions.
     • Buy a house. Owning your own home (or two) means you can deduct for points on loans and for interest on loans.
     • Repair your house. Fixing up a home to make it more energy efficient can be a deduction. KEEP RECORDS.
     • Buy a car. Buying an electric or alternative fuel vehicle can be a deduction.
     • Get a loan. If you have certain types of loans (school/home) they might be deductible.
     • Give to charity. Charities are a great way to get rid of stuff you don't need or want any more. KEEP RECORDS.
     • Serve for a non-profit. You might get un-reimbursed mileage and other expenses. KEEP RECORDS.
     • Be a teacher at a school. There is a deduction for things you buy out of your personal funds without reimbursement. KEEP RECORDS.
     • Pay sales tax. When you pay sales tax it might be deductible. Especially keep track of those high-ticket items. KEEP RECORDS.
     • Open an IRA or contribute to one.
     • Pay your alimony. It's deductible.
     • Pay medical costs. Unreimbursed medical costs are deductible.
     • Be in a disaster. Well ok don't be but if you are?some unreimbused costs may be deductible.
     • There are other deductions available and your own individual situation will vary.
4. Take all the deductions you are entitled to. That's why they are there.
5. If your tax situation is complicated hire a professional to help you out because the money they save you often more than pays for their fees.

Tips

• Keep records in anyway it is convenient for you. Write it on the back of the receipt and file it away for the end of the year. Put it in a jar or several or put it in a file cabinet or get a box.
• Remember that even with paying taxes, you will still have lots of your own money left over to spend. Out of control spending and debit can make taxes seem like a burden at tax time. Each purchase you make is an investment in your future tax picture.
• Be aware what is coming up next year. Some tax deductions get eliminated each year and others get added.
• Check the IRS website.

Sources and Citations

• http://www.irs.gov/

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