We took a day off of cleaning last night. It feels good to have gotten this far and we felt it necessary to free up some time to sit in front of the television and veg-out for a bit.
So with that in mind, let's discuss taxes, because that is probably the biggest thing on the list in terms of importance.
This year we have a tax issue - Despite our best efforts, we've managed to actually make some money this year and that means that Uncle Sam will eventually come knocking and want his "cut"
As you have read in previous posts, we are donating to Goodwill as a way to get deductions for this year’s taxes. But that isn't all that we are doing. We are also working on the following:
1. There is repair work that we need to have pre-paid this year at our rental house - Keep in mind that only "repairs" are fully deductible this year, "improvements" like a new roof are depreciable over time and are worth far less as a deduction now.
2. Selling off losing stocks before years end. We'll do this even if we like the stock so that we can "capture" the loss. You are allowed to take a loss on any stock that you sell so long as you do not re-purchase that same stock for at least one month after your sale. Often, you can purchase the stock back for the same price if you sell at the appropriate time. Stock losses that you capture in this way are used to offset gains from other sales and will also allow for up to a $3000 deduction from your regular taxes if yu have more losses than gains.
3. Retirement saving. Almost everyone knows that putting money in an IRA (Individual Retirement Account) will allow them to defer taxes until a later date, but not many know that there is also the ability for a self employed person (or someone who has a self-owned business) to invest a considerable amount of money in their retirement through an individual 401k (information can be found here: http://mutualfunds.about.com/cs/retirement/a/individual401k.htm
4. Paying mortgage payments early. By paying mortgage payments early, you are in effect borrowing from next years deductions, but compared to paying money to the government, this is certainly a better option.
5. Buying equipment for business use. Since we still have some personally owned business, we can still use the gain that we have to offset purchases that we need to make. A new 2000.00 computer is nearly half price when you consider that it reduces your take bill by your tax rate if you owe taxes. Since we need to upgrade some stuff, now is the time.
Remember that if you are replacing equipment, you can donate this for a deduction as well. If you intend to use the old equipment for personal use or sell it, you will most likely need to re-capture some of the value, so put this transition of use off until next year if at all possible.
There are others, but I'll be covering all of these tax issues in detail as the months progress. I just wanted to get you thinking about these things before the end of the year.
By the way… just a small disclaimer for the legally minded. I’m not a tax attorney... I don’t even play one on TV… so if you take my advice on taxes, use common sense and double check anything I tell you with a real tax professional.
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