Our taxes are impacted any time we receive or pay money, and we have a lot of control whether that impact is positive or negative.
Here are a few things many of us will be doing over the coming holiday weekend and how they can impact our taxes.
What Are You Doing This Weekend That May Impact Your Taxes?
#1 Traveling
Travel always brings the opportunity to reduce your taxes by turning your travel expenses into legitimate business deductions. If you’ve been receiving my reports for awhile, you probably recognize this topic because I write about it a lot.
#2 Shopping
Who and what are you shopping for? Are you shopping for people with whom you do business? Are you shopping for business gifts?
The items you purchase may be business deductions! Keep in mind that in order for an item to be deductible in your business it must have a business purpose and be ordinary and necessary in your business.
There is one more item to keep in mind when shopping. The deductible amount of a gift is limited – even if it has a business purposes and is ordinary and necessary.
So, when you are doing your shopping, it’s important to consider if what you are buying is a gift. If it is, the deduction may be limited. If the item qualifies as something else, such as a promotional item, then the deduction is not limited…but remember it must still meet the business purpose and ordinary and necessary requirements.
#3 Getting Organized
With a long weekend usually comes the lofty goal of cleaning out certain areas of the house. If this is on your to do list, use it as an opportunity to get organized for your 2009 taxes.
Being organized is an effective tool to make sure you do not miss deductions.
#4 Going to Parties This weekend kicks off the holiday party season. Here are a few questions to ask yourself when you attend or host holiday parties.
Is the party business related? If so, your travel there is business travel. If you are taking a taxi, it’s a business deduction. If you are driving, the miles are business miles.
If you are hosting the party, is the party for business? If the party is a business event, then be sure to track all of your expenses. Generally, meals and entertainment expenses are only 50% deductible. However, an office party for the benefit of the entire office can escape this rule and be 100% deductible.
Year Round Tax Planning
Remember, every day is an opportunity to reduce your taxes. In my tax coaching teleconference last week on year-round tax planning strategies, we covered a broad range of topics, including:
Tax planning for losses and how to use reverse tax planning in this situation
Increasing the right type of income to shield disability or social security income from taxes
Determining how much to pay yourself in salary during your first year of business – many people pay too much in tax because of a common first year mistake
How adding a management company to your tax structure could result in $10,000 in annual tax savings
Whether to do fix and flips inside an IRA or outside of an IRA
All of these topics are situations we come across in our normal routines. Knowing how to turn them into an opportunity to reduce your taxes is the key to a successful tax strategy.
Copyright (c) 2009 Tom Wheelwright