1. Pay deductible expenses by credit card
Charge a business expense, make a charity donation, or make another deductible expense in December, and it still counts for 2008. This way you don't have to actually pay it until the bill comes in January.
2. Put your holiday bonus in an IRA
For low-to-mid income earners, you may be able to deduct all or some of your IRA contribution from your taxes under the IRS "Saver's Credit." More info here.
3 .Give to charity
Give to the needy, cash or clothes, and follow proper documentation procedures. It feels good, and you can deduct it from your taxes. IRS Publication 526 has the info you need.
4. Incorporate!
If you have a second income, think about incorporating yourself as an "S" corporation and possibly getting big tax benefits. You can get Social Security/Medicare tax advantages. "The tax reduction, say, for a reservist with his own small business can be $3,000 to $8,000 per year, depending o the volume of the business and type of industry," a CPA told USAA mag.
5. Make An Extra Mortgage Payment
Make your January '09 mortgage payment now and deduct its interest this tax year.
'Tis the Season — For Tax Prep: A little work now can pay off next spring. [USAA Magazine]
]]>I know the more strict tithing religions such as Catholicism and Mormonism only require 10%.
]]>Priests need Cadillacs too...
]]>(sorry you left yourself wide open for that)
]]>In all my years of being a Christian, only once was my family looked down upon for not tithing and that was by my father's Catholic church. Since I am a Christian and not a Catholic, this doesn't bother me.
We just pass the plate and you give what you can.
]]>They also said, after getting everything filled out that a bonus was not guaranteed.
]]>@dallasmay: I like giving to my church, but it is nowhere near 10%. The idea of the "biblical tithe" originally applied to farmers and ranchers to give 10% of their crop to their church so that others in need could eat. Over the years the idea has been stretched to include income and the "tithe" went to running the church, paying for fancy sound and light systems, and choir robes.
Again, I am not against giving money to your church. But the tithe no longer applies. Just give as God calls you to give.
Wouldn't you rather hold out until the 1st be 'first baby of the new year' and get your picture in the paper and all the free diapers and stuff?
]]>More often than not money is expected and if you didn't know that then odds are you never went to Church. I'm not saying that they all operate this way, but it is the norm.
]]>ps
i don't have good swimmers (dog paddlers) so the earlier we start the better chance you will have of getting that extra deduction.
Not really. A $100,000 / year family before taxes is expected to give $10,000 to their church or synagogue. My wife and I make about $85k before taxes, tithe 10%, save 10%, and have a mortgage of about 20%. We easily run WAY over the standard, and we don't even have kids.
]]>www.edf.org
]]>Think it through all the way.
Paying your Jan 09 payment in Dec 08 means you get 13 tax deductible interest payments in 2008.
But then, in 2009, you end up with 12 tax deductible interest payments.
You already paid the Jan 09 payment/interest in Dec 08, and can't use that as a writeoff in 2009.
Then you pay and write off your Feb-Dec 2009 interest payments (11 payments total)
Then, you pay and writeoff your Jan 2010 interest (add 1 payment).
That still leaves you at 12 mortgage/interest payments per year.
Hence, why I consider it such a dumb idea.
Yeah, you get a couple of extra bucks worth of writeoffs one year, but you lose those writeoffs in following years unless you prepay the January payment every December (and even doing that just puts you back to a regular 12 payment per year thing).
/Also, I'm assuming that anyone that can afford to make a mortgage payment a few weeks in advance could instead skim some of that money off to prepayments. Even an extra $100 direct to principle would help.
]]>Also my holiday bonus was a shot of bailys.
]]>Here is the one problem with all these wonderful ideas....they require you to have money to spend right now....once again...the rich get to get richer...and yes I am bitter.
]]>If it's a simple interest loan, and not a traditional mortgage, then no, you won't get charged extra interest if you make an early payment at the end of 2008.
]]>@SusannaArcesius:
This depends on how the loan is set up. My bank assesses the interest as of the date the payment is received. Assuming they received the December payment on 12/1 and the January payment on 12/29, the 12/29 would have 28 days of interest accrued (and paid in 2008).
@sled_dog:
And then only if it is not in a tax-sheltered account such as an IRA or 401K.
And if you are once again screwed and have to pay the AMT? That's what the Bush tax cut got us. A hike to AMT and no $600 check.
]]>I realize that you disclaimed what you were saying, but I think you're totally missing the point here. Paying down principle and moving up a planned payment to save on taxes are not mutually exclusive goals.
]]>@DrStarkweather:
I believe you can only take losses if you sell.
That's stupid advice.
If you're going to pony up the money for an extra mortgage payment. It's better to apply the entire payment to the principal.
Making a mortgage payment early so that you can pay the interest early to get a tax writeoff on said interest is simply dumb.
-----
here comes the math, YMMV depending on how deep into your loan you are. Not applicable if you don't actually have the money lying around to make two payments in December plus another payment in January.
-----
Assumptions
$300,000 loan
30 years
5% rate
Let's say you just got this loan in Jan of 08. The interest on your Jan 09 payment would be $1,233.13.
So you deduct that on your 08 taxes and get a fraction of it back. (or, if you do your taxes right, you shouldn't get anything back, but would pay less in to taxes month over month).
That same $1,233.13 payment applied to the principle would save you $3982.95 over the lifetime of the loan and result in you paying the loan off in 29.75 years vs 30 years.
]]>@yajjo: hahahaha awesome
]]>@CountryJustice: Ahhh, my native land, where retirees dominate politics and policy (and property taxes are considered sodomy) :D
Most states do have income tax, so I was trying to be general and broad there.
]]>I donate to charity, and give away a ton of clothes/miscellany to Goodwill--I even started keeping very specific records of everything I donate--and I still don't come anywhere close to exceeding the standard deduction amount. Then again I have a very modest income, don't own a home, and am still deferring student loans, so I wouldn't presume that only the wealthy could exceed the standard deduction.
]]>@Adam Bourg: Please tell me it was Dunkin Donuts and NOT Starbucks. Please, o pretty please....
]]>This makes no sense. The bank is not going to charge you 13 months of interest because you made a payment. The entire payment will go towards paying down the balance (not a bad thing, but no tax benefit from it). The interest won't be deductable until it is both charged by the bank AND paid by the taxpayer.
]]>What holiday bonus??
]]>With software, it's usually good to itemize even if you don't meet the Federal standard deduction...because most STATES have much lower standard deductions and you stand to benefit there.
IIRC, my wife and my itemized deductions are about 2x the Federal standard deduction, but like 6x the state deduction (mostly through charity). With software, you only have to enter it all once, save for any specific details the state might want.
]]>Since we're in a down economy, this would be a great time to try to do an extra mortgage payment this year, to hedge your bets about lower compensation next year.
]]>sorry for the multiple posts but if your going to do #5 for mortgages you might as well do it for student loan payments as well
]]>is it just me or is #5 ridiculous. your lowering your tax this year but increasing it for next year (unless your smart enough to remember to do it again).
]]>If you are asking, "should I sell at a loss to make them 'real'", then I have no idea. Up to the taxable limit it may make some sense (esp in the case of real garbage stocks-- strengthening your portfolio by getting rid of perennial losers is always a good idea), but it really depends on what you have and where.
That's a decision to make with an advisor/accountant, not from Consumerist/internet posters.
]]>My Holiday Bonus came on a pink piece of paper this year...
]]>I have it on good authority that opening a center for wayward kitties is tax deductible.
Sadly, adopting pig-like children is not. Lessons learned.
]]>"holiday bonus"
DOES NOT COMPUTE
]]>I learned in a tax CPE class last year that if you don't know which charities you want to contribute to right away, Fidelity has a nice product called the Charitable Gift Fund.
With this, you are generally able to contribute to this and take your deduction right away for 2008 then grant your balance in the funds to the charitable organization(s) of your choice in 2009.
However, consult a tax professional before you do this as this comment is intended to be informational only and should not be considered as tax advice.
]]>(IANAAccountant, so I could be way wrong here.)
]]>