TAX TIP OF THE DAY... start a small business!
Deduct the expenditures related to your favorite hobby by starting your own small business. One idea is to sell related products from a web site (Ebay, Etsy, Weebly, Square Space, etc.). Another idea is to give lessons related to your hobby. Example... You play the saxophone. You start giving saxophone lessons with the hope of having many more students once you retire. Now you can deduct saxophone expenditures... new horn, horn polish, horn supplies, Kenny G concert, saxophone practice room. You may need a tax advisor to help, but that's a tax deduction too! SHARE WITH A FRIEND. If you need a tax appointment... www.baboiancpa.com TAX TIP OF THE DAY... MC Hammer says "Can't touch this".
Early retirement distributions are a bad idea. The tax law penalizes you severely for not waiting. Look for other options for cash... loans from your 401k (tax-free), home equity loans, family loans, slow down spending. If no other options exist, consider pulling out only 1/2 of your original early distribution plan. Can you delay your cash needs? It's the perfect time to call your tax advisor to help with possible exceptions and to help you strategically plan which account to pull the funds from. It's not a good situation, but a tax advisor can help you minimize the damage. SHARE WITH A FRIEND. If you need a tax appointment... www.baboiancpa.com TAX TIP OF THE DAY... IRS is dumb but not stupid
So don't try to deduct expenditures that are obviously personal: 1) Valentines Day roses 2) birthday party (yes, they have your birthday) 3) Disney family vacation 4) Christmas gift to spouse If you are ever audited and the IRS finds one of the above transactions, they will immediately disbelieve all other deductions. They will dig in and turn the audit into a 2 week witch hunt. It's not worth it, especially since there are so many other GREAT DEDUCTIONS available to you. SHARE WITH A FRIEND. If you need a tax appointment... www.baboiancpa.com TAX TIP OF THE DAY... deduct Hallmark greeting cards
Greeting cards are sometimes up to $10 each! Do you purchase greeting cards for co-workers, customers, vendors, the boss? Deduct cards for birthdays, thank yous, get well, new births, sympathies, encouragement, secretaries day. And don't forget the postage if you mailed the card. SHARE WITH A FRIEND. If you need a tax appointment... www.baboiancpa.com TAX TIP OF THE DAY... deduct rock salt, snow shovel, snowblower, plowing
Do you own a home based business? Is it important that you get out to service your accounts even on snow days? Deduct the cost of "urgent snow removal" in order to access your clients... rock salt, snow shovels, snow blower (including gas, oil, maintenance) and snow plowing services. You must reduce your deductions by the costs by ordinary snow removal... one shovel. SHARE WITH A FRIEND. If you need a tax appointment... www.baboiancpa.com TAX TIP OF THE DAY... deduct 529 college plan contributions
PA allows each taxpayer to deduct 529 college plan contributions up to $14k per student each year. If you want to contribute even more... double it by having each parent contribute $14k toward the child's 529 account. The deduction is not limited to your own children. You can deduct contributions to the 529 accounts of grandchildren, nieces & nephews, neighbors, friends, etc. OTHER STATE'S 529 PLANS: The deduction is not limited to the PA TAP program. You can use contributions to any other state's 529 plan as well. GRANDPARENTS MAY NOT BE IDEAL CONTRIBUTORS: Keep in mind that a retired 529 contributor may not have any PA tax liability and therefore would gain no PA tax benefit from a 529 contribution. So it may be better for a grandparent to gift the funds to their working child... who could gain a PA tax benefit by contributing the funds to the grandchild's 529 account. SHARE WITH A FRIEND. If you need a tax appointment... www.baboiancpa.com TAX TIP OF THE DAY... high school students paying college fees
The bad news... No deduction for SAT or college application fees. The good news... High school students taking 1 or 2 college courses in their senior year can take either the Liftime Learning Credit or Tuition and Fees deduction. However, the Hope Opportunity Credit is not available. Warning: several online authorities incorrectly state that no tax benefit is allowed. SHARE WITH A FRIEND. If you need a tax appointment... www.baboiancpa.com TAX TIP OF THE DAY... American Opportunity college credit
The American Opportunity credit is the best of all college tax breaks and provides up to $2,500 of additional refund. You need the 1098-T tax form issued by the school to determine your eligibility. Credit basics: 1) 1098-T... at least 1/2 time box must be checked 2) 1098-T... graduate degree box can not be checked 3) Adjusted gross income must be under $180k 4) you can use up to $4k of tuition, books and supplies not paid by scholarships 5) you must be claiming the student as a dependent on your tax return 6) you can use tuition paid by student loans. SHARE WITH A FRIEND. If you need a tax appointment... www.baboiancpa.com TAX TIP OF THE DAY... IRA deduction by April 18th?
Consider making a deductible IRA contribution by April 18th. It might be just what you need to: 1) pull you down into a lower tax bracket 2) allow more Obamacare premium tax credit 3) allow more child tax credit 4) allow more earned income credit 5) decrease taxation of social security benefits 6) allow the retirement savers credit. Discuss qualifications, details and potential results with your tax preparer. SHARE WITH A FRIEND. If you need a tax appointment... www.baboiancpa.com |
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AuthorDavid S. Baboian, CPA Archives
February 2018
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