Cutting Your Taxes for Next Year

Cutting Your Taxes for Next Year

Know your tax bracket

Use retirement accounts

Consider starting a small business

Don't trade capital assets outside of retirement accounts

Buy a home - if you want one

Track your expenses

Know your tax bracket

Try to keep your income within a certain tax bracket

Look into tax-exempt bonds if you're in a high tax bracket

Use retirement accounts

Look into starting or expanding your contribution to an IRA, 401(k), 403(b), Keogh or SEP retirement account

Retirement accounts reduce your taxable income while allowing you to save for retirement

Consider starting a part-time small business

Consider starting an unincorporated, Schedule C business

May be a good way for a spouse to work and stay active

Losses from the business reduce your taxable income

This may be a way to turn your hobby into a tax-deductible business

Watch out for hobby-loss rules

Don't trade capital assets outside of retirement accounts

Trading securities subjects you to capital gains taxes

If you want to trade securities, do it inside your tax-sheltered retirement account

Buy a home - if you want one

Mortgage interest and property taxes are tax deductible

Buy a home because you want one, not just for supposed tax savings

Track your expenses

Track your expenses, especially potentially deductible expenses

• medical
• charity
• mortgage interest
• investment interest
• state and local taxes
• unreimbursed job expenses

Spending records will tickle your memory at tax time, and provide documentation for IRS