No one likes paying taxes, it doesn't matter how the taxes are used in improving the quality of our country. Due to this reason, people procrastinate as much as possible on the payment of taxes and when the time comes it is all a big race against time. However, here are some tips that could make you prepared in advance to save on tax.
(i)Make prepayments on your 1 January mortgage payment ? Make a check for the payment due 1 January before the previous 31 December. This would make you eligible for tax deduction on that payment in the next year. Even if you have postdated the check, the tax deduction stands.
(ii)Last-minute expenses and donations ? Make some donations before the 31st of December. Then you could avail of the tax benefits that go along with these charitable expenses. Be sure to use your credit card to make these donations.
(iii)Defer your income ? Stall your December incomes until January. You can request for deferment of the Christmas bonus to the New Year. This tip can be used also if you are self-employed. Just make your December bills in the month of January. With investments, some companies would allow to postpone paying taxes until a later year even if the income is earned this year.
(iv)Scrounge for all tax deductions ? Look out for all heads where tax deductions apply. There are several places where a taxpayer can get deductions; so many in fact that some of them can be missed. Even a couple of more deductions could bring about measurable tax deductions.
(v)Make charitable donations ? Whatever you do not use, donate it to charities. Clean out all the old stuff cluttering your home and donate it to a charity that you know about. Get receipts for your records. Deductions can be claimed on this amount equal to the wholesale market price of the items given. Thus cleaning up your attic or garage could be in fact a rewarding experience in more ways than one.
(vi)Put your kids on the payroll ? You can pay your kids for small chores around the house provided they are above fourteen years of age. This would transfer some of your high taxable income to your kid's low taxable income. However do not pay them too much, or it could be a deterrent in their getting financial aid when they are ready to go to college.
(vii)Make investments in your kids? names ? All investments made for the future of your kids are tax deductible. You can get a deduction of up to $700 in investment income per kid, provided that they are above fourteen years of age.
Keep these elementary tips in mind and they could go a long way in making you actually whistle and sing while paying taxes. Make advance preparations and save hugely on your tax payments.
Even though many people think that refinancing their home is an expensive proposition, the truth is that refinancing can saves homeowners hundreds of dollars on a monthly basis. In addition to saving money each month on your house payment, there are also tax benefits associated with refinancing your home loan.
By making yourself aware of the potential tax benefits of refinancing and planning carefully, you can help keep a greater percentage of the funds you save in your own pocket.
Itemize Your Deductions
When you first finance or refinance your home, most of the money you pay each month goes toward the interest on your loan rather than toward reducing the principal balance. For many homeowners, taking advantage of itemized deductions allows them to save taxes because they are able to write off the interest paid in on their home loan.
Spouses who file joint income tax returns are able to deduct up to $1 million of interest each year. If you had a mortgage for $300,000 and you refinance your home with a $350,000 mortgage, you can enjoy increased tax deduction benefits associated with the additional interest you are paying.
Under Internal Revenue Service regulations, the amount of your new loan that replaces the original loan ($300,000) is home acquisition debt. The additional $50,000 of the new loan is classified as home equity debt. Interest paid on both types of home-related debt qualify as a legitimate tax deduction.
A couple of caveats: Be certain that the home equity debt must be less than $100,000 and the total amount of debt on the home does not exceed the actual value of the property.
Improve Your Home
Many people refinance your mortgage for an amount higher than their original loan amount for the purpose of making improvements to their home. In this situation, homeowners are able to take an advantage of an additional tax deduction equivalent the portion of loan points paid during the initial year of the loan.
This tax benefit covers all types of home improvements, assuming that that the improvement is within the scope of a reasonable improvement that has a positive impact on property value.
Additionally, interest paid on money used for expenses not related to home improvement may also be deductible in certain situations.
The Advantages and Disadvantages of Amortization
When you pay points to buy down the interest rate on a home loan refinance, you are able to recover some of the money through tax deductions. Points paid on a refinanced mortgage are amortized over the life of the loan. The amount that you pay in points can be written off, in even amounts each year.
If you end up selling your home before the loan is fully paid off, or if you refinance the home again, you are allowed to write off the remaining amount of the deduction in the year the home is sold or the loan is refinanced.
Learn Tax Advantages
To learn more about the tax advantages of refinancing your mortgage, read Home Mortgage Interest Deduction (IRS Publication 936). You should also speak with your tax advisor before making a decision.
You can learn more about the tax benefits of mortgage refinancing from the IRS Publication 936, Home Mortgage Interest Deduction. It's also important to consult with your accountant or tax attorney to learn how refinancing your home loan can impact you and your tax liabilities.
Both Adam J. Heist & Joshua Suffie are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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