Now that the children have grown and gone so has many tax deductions such as Personal Exemptions, Child Tax Credit, Earned Income Credit, Child Care Credit, and the College Tuition Credit. To make matters worse, at this point in life many people are at their peak earning and many have homes that are paid off or almost paid off. All this makes for higher income and less deductions which of course means higher taxes.
For single parents the problem only increases because there is not a spouse to claim, the standard deduction is lower and if they had children, they usually had some sort of child support that was non taxable and has now ended.
What is a person to do? One of the popular ideas is to pour more money into your IRA or 401K plan. As I was passing through a town in Montana, there was a bill board from a nationwide bank, that said, "Retire a millionaire with an IRA." My thought was, "in order to retire a millionaire using and IRA you would more than likely have to put a million dollars into the plan and then hope it doesn't loose money."
In defense of the bank, there is a tax deferment on contributing to those types of plans. However, there are limits to how much you can contribute each year. Also, you still have to pay on the money when you take it out and if you take it out early you must pay a 10% penalty.
It is interesting to note that 401K plans were originally set up for wealthy individuals to have a place to dump large sums of money tax deferred. Since then IRA and 401K plans have been changed for the average person with the idea that when people retire they have less expenses and would be better able to with stand the tax hit. As time has proven, most retired people have less expenses, but also have less income and so paying the taxes is usually a burden.
So, what's a person to do? The secret to paying less income taxes is simple. Find ways to make the things you already spend money on tax deductible. The best way to do this is to turn a hobby or interest into a business. There are many things you can deduct when you own a business that you cannot deduct ordinarily.
Look at the example of a person why has a hobby of wood working. This person has a room in their home and has bought many tools and he loves to tinker and make decorative items out of wood. If he turns it into a business, now he can deduct all the tools and supplies he used to make the items.
The room you use in your home can be deducted by claiming a percentage of the rent, interest, taxes, utilities, insurance, and repairs to the house. All of those things you are going to pay for whether you have a business or not. Much of your travel expense may be deductible now.
As you travel to visit your children and grandchildren you can make the trip deductible by checking on new ideas and materials that will improve your products, attending trade shows, etc. You may travel to craft and trade shows to sell your products. If you choose to sell products over the internet, your internet costs will now be deductible. The list goes on and on.
Besides tax deductions, owning your own business can be part of your retirement plan. After you retire, you can keep doing what you love and create income to supplement your retirement and still keep the tax deductions. If you choose a business that you can train others to do, then that business can produce income after you stop and generate passive income to supplement your retirement.
The good news is that we don't have to be penalized for being a good parent. There are many laws within the IRS code that we can use to structure our tax situation. Doing the things in life that you enjoy and are passionate about will always create success and joy.
When being asked debt questions and advice Tax Deductions are one of the few areas of the tax system that EVERYONE really should like! Because they are all about saving you money, rather then costing you money. Hence, as a small business owner, it's wise to familiarize yourself with some key deductions that may reduce your tax bill for the tax year ahead.
Each business is a different though so be sure to mention your expenses in detail to your tax advisor or accountant to see if your business can qualify for these deductions. As a home business owner who has been keeping track of every dollar spent, you can make a killing on your tax deductions with some of the thoughts I will outline here. And hopefully, you can maximise your tax deductions in the year ahead with this information and see all that cash that would otherwise have gone to the taxman flow back into your business.
Small business tax deductions are usually implemented on the expenses involved in the business and largely depend on the type of business and the expenses that are involved. But where you can help out is by keeping accurate, dated records of your expenses, so that when you do have debt questions and chat with your accountant about possible tax deductions, he has the full picture available to him.
It is a fact that that most people just don't have the time to search the long list of overlooked tax deductions. But if you have been keeping good records throughout the year then you will find it much easier to do your taxes and find the tax deductions that are right for you and your situation. And with the many items that most business (even individuals) have to think about on a daily basis, it is even more important that you have the most recent and accurate information about small tax credit and deductions. This is where a good accountant is indispensable.
Big Brother Is Watching You....
It is a fact that small business owners are three times more likely to be audited by the IRS than a non-owner. So it is very important to have accurate information, and to make sure you qualify for the credits and deductions you are claiming. Whether you are looking to maximize deductions, reduce taxes, or increase your returns, you should take the time to learn as much as possible about the IRS per diem tax rules. (Or at least make sure your account is!)
Frequently overlooked tax deductions include the amount of money spent on sales tax, tax preparation, gambling losses, property taxes, and more. And pursuant to relevant provisions of the tax code, you can take significant deductions if you donate money or goods to a qualified charity.
An individual wishing to take advantage of the federal tax deductions may choose from standard deduction or itemized deductions. Claiming more tax deductions is the key to paying less taxes and getting a larger tax refund. Other tax deductions that you might want to look into (depending on your circumstances) are - Home mortgage interest, real estate taxes, property taxes earned, income credit, child tax credit, child care credit, energy tax credits, state and local income taxes, charitable contributions, home office deductions and medical and dental expenses... Phew! Quite a list! But the good news is that there are many more tax deductions and credits available, if you know how to find and use them to your advantage.
Both Christopher Anderson & Stuart Brown 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.
Christopher Anderson has sinced written about articles on various topics from Debts Loans, Real Estate and Sell Home. Christopher Anderson feels that peoples' money does them and the economy more good than in the Government's hands. He is dedicated to educationg people on the tax deductions that are available to them.. Christopher Anderson's top article generates over 40500 views. to your Favourites.
Stuart Brown has sinced written about articles on various topics from Health Insurance, Auto Insurance and Arts. There's no reason you should be embarrassed about your lack of knowledge about tax deductions. Visit to get the information you nee. Stuart Brown's top article generates over 110000 views. to your Favourites.