For several reasons, the best thing you can do is start a business. There are many items you can deduct the business portion thereof that you cannot deduct now. I kept the books for a lady and couldn't believe it: her bank had prorated what portion of her mortgage was the business portion and she was allowed to deduct that. Some items have to be capitalized. That means depreciated over time and you cannot deduct those expenses immediately.
Here's a few. It takes years. While you learn, you should contact an enrolled agent in your area. A CPA is useless to you unless he is an enrolled agent.
As for health %26amp; medical, you can only deduct that portion that is over and above 7.5% of your adjusted gross income unless you have a business. If you have a business, you should purchase your health insurance through your business name. That way, you may deduct 100% of the premiums on your Schedule C. If you do not have a business, or do not wish to start one right now, you should familiarize yourself with the 1040 Schedule A. It takes a while to get really familiar with all of this, so you may want to go to an enrolled agent for the time being. That way, you will pay the lowest possible legal income tax liability.
Here's a little more. Please keep referencing this:
BE READY: WHAT YOU NEED
1 Form 1098's from the bank, mortgage holding company or HUD, etc.
2 Get TIN, itemized Statement and value of donations from the recipient of the donation. E.g: Salvation Army TIN is 58-0660607.
The IRS is now a lot stricter in their requirements with regard to giving away automobiles, vessels, aircraft, computers and certain investments than
ever before. The IRS has a new Form called the 1098-C that specifically deals with the charitable contribution of your vehicle. Do not donate a vehicle,
boat or airplane UNLESS the recipient of the donation provides you with this 1098-C or a written acknowledgement containing all the information required
by the 1098-C. If the donee sells the vehicle, the recipient of your donation MUST fill in Line 4C or write down when he sold the vehicle, sign it, and
or course put his Taxpayer Identification Number. If the donee does not, you will only be able to deduct the LESSER of the fair market value of the vehicle
or what the vehicle was sold for by the charitable organization. For donations exceeding $500.00, the recipient of your donation must supply a written
statement acknowledging the donation. Even if do not itemize, you still MUST attach the Form 1098-C. For these non-cash donations, the donor may not claim a
deduction in excess of what the donor sold the mode of transportation for. If the vehicle had a value of between $250.00 and $500.00, the donee must
provide a statement of any cash received, a description of the property donated and whether any goods or services were rendered in exchange for the
donation. If the vehicle was sold for significantly below fair market value, you may be able to deduct up to $500. If the vehicle was sold for gross
proceeds which equaled or exceeded fair market value, you may only deduct the FMV [1098-C or written acknowledgement by donee]. If the charitable
organization did intervening substantial use or upgrade, there should be a written statement of such. If the charitable organization intends to sell the
vehicle for significantly under FMV, the charitable organization must type up a statement detailing such within thirty days of receiving the donation along
with a certification that the sale is a direct furtherance of the charitable organization's purpose of relieving the poor and needy or the underprivileged
whom are in need of a means of transportation.
3 The new Schedule B: did you have any bank or securities account abroad or did you have an interest in any bank or securities account abroad worth more than 10,000.00? Unfortunately, this includes military. It also includes those of you whom emigrated to the United States and you still have an interest in any bank or securities account back home. If you fail to fill in Part III of the Schedule B, the fine is $10,000! And you must fill it in even if you use the 1040-A or 1040-EZ.
4 Have you incorporated yet? This can lower your taxable income tremendously and even possibly qualify you for the earned income credit and even maximize the Child Care Credit for you.
5 Have a storage space to save all your receipts and keep a diary of all of your expenses.
6 Did you have anything of fairly large or large value stolen?
7 W-2's, 1099's, Schedule R's. Have you had a debt forgiven? It has to be reported in income. And, are they correct? I may have to fill out a revised W-2 Form.
8 If you loan to a friend or relative, make sure you have a written agreement to repay, make the interest rate in line with bank or credit union interest rates in your area and get their SS#.
9 Keep your state inspection stickers. Park your most expensive vehicle at your business if possible.
10 Make large purchases for your business in the final quarter of your fiscal or calendar year {Section 179 deduction}.
11 Incorporate and set up a Health Savings Account or HCA. Be careful about Self Employment Plans and SIMPLE's. You may not be able to match all of what you employees wish to contribute.
12 Make your vacation a business trip. The rules: - if less than seven days, can deduct all the expenses. Caution! No largesse. -if be more than seven days, day depart does not count in figuring; day returning does.
13 Figure your potential alternative minimum tax liability before you refinance at higher interest or higher payments. You may not be receiving a tax break at all and may end up paying more tax!
14 If you had to fill out a ';short form'; previously, figure your charitable contributions over the past five tax years.
15 If you give away material, clothing, vehicles, collectibles, etc, worth 5000.00 or more, make sure you get a Statement from an appraiser and make sure it is signed by that appraiser. When you donate material worth more than 250.00, get the TIN, itemized list of donated items and the worth signed by a representative of the donee.
16 How much did the vehicle cost if you are going to use as the vehicle used in your business including the State sales tax?
17 See the ';tie-breaking rules'; in the IRS' Publication 17, page 27, as to whom gets the dependent exemption in the event two or more taxpayers claim the same dependent. Also, review the rules for qualifying child and qualifying relative. This will save the expense of having to ask me. It takes time to determine.
18 Get the EIN or TIN of the Daycare Center or babysitter with regard to your Child and Dependent Care expenses. Allocate per chld your expenditures.
19 If you cannot make up your mind to incorporate, become a sole proprietorship and use your home as a business. Measure the square footage dwelling and the square footage of what you can use for business related items and transactions.
20 Have you moved, is the driving distance to your job more than fifty miles from your old job and have you worked at the new location for 39 weeks? Save your receipts, keep a journal of your expenses, including storage and meals [reasonable].
21 If you received a Retirement plan distribution and you are under fifty-nine and a one-half, roll it over into a Roth IRA before sixty days.
22 For 2007, you can have a total of 4000.00 for student loan interest deduction, tuition and fees expense and credit (Form 8863).
23 Make sure that the tenant shows to you the 1099 [ordinarily a 1099-MISC] that he/she sent to the IRS if you purchase a property to rent out, an investment vehicle or a property that you intend to rent for a portion of the year.
24 If you are a day trader, know what your commissions were and have the list of trades from your broker.
25 Before trading stocks, fill out a 475(f) or launch a corporation that trades stocks. But make sure you send in estimated tax if you are having capital gains.
26 When you have real estate, be a material participant. Save your receipts and keep a diary of your expenses. When you take a business trip, it is a deduction so long as the trip is business related and has a business purpose. Make sure you make the decisions and approvals and not a management company that you hire. Write down the names and positions of the people you meet with. IRS auditors study the contract with the management company.
27 What health insurance you carried for each business you had. Set up a business checking or savings account and pay for your health insurance ONLY out of your business banking or credit union account.
28 Are you and/or your spouse over sixty-five and/or legally blind?
29 Do you qualify as disabled on the Schedule R?
30 Tuition and fees statement from a qualified school. It's the 1098-T.
31 There are exclusion limitations for long-term medical expenses. If you exceed 91250 for 2007 {I'll have to check for the exact figure}, the excess is excludable from income only to the extent of actual costs in excess of the IRS dollar cap incurred for long-term care services for the 2007 calendar year. Amounts in excess must be included in income. The exclusion of $250/day (91250/year) is reduced by reimbursements and payments received by anyone for the cost of qualified long-term care medical services for the chronically ill.
32 Did you or your corporation pay alternative minimum tax last year? Fill out Form 8801 if you are an individual.
33 Hurricane Katrina retirement plan distributions.
34. Fill out the necessary forms for a SEP, SIMPLE, HSA, HCA; credits for low burning fuel vehicles, housing energy credits, etc.
CONSULT ME REGARDING:
1 Do not sell stock that you have held for less than 366 days. This is known as a short term capital gain. A short term capital gain is treated What kind of things can a married couple write off their taxes?
Yes! Thanks for your vote.
Lord Bless:
Rocky
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Depends on your situation...
Do you pay mortgage interest? If yes look at Schedule A for other expenses to deduct.
Did you move in 2007? Did you pay tuition, childcare? Did you contribute to your retirement account?
Are you a teacher?
Do you have a rental property?
Do you owe a business?
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