The Top 5 Tips For Your MA Tax Planning:
- Recordkeeping: The least favorite of all strategies, recordkeeping can be quite rewarding in the long term.
- A regularly maintained mileage log in your car can bring up to $.55per mile in deductions.
- Receipts for home office related expenses can lead to big deductions based on the size of the home office.
- Tracking all your real estate related expenses (closing statements, repairs, and contract labor) has big tax impact, and offers protection in case of an audit.
- Most important of all: Good recordkeeping help you to be audit proof.
- Year-to-Year Comparison: This simple action can reap powerful tax benefits. Get a copy of your last year’s tax return. See if you had any adjustments to income and itemized deductions.
- Capital Losses: In today’s turbulent stock market, it is unfortunately routine for taxpayers to have large capital losses.
- Take these losses prior to year-end to reduce your tax liability. Capital losses offset capital gains on a dollar-for-dollar basis.
- You are only able to take $3,000 in capital losses per year against ordinary income. Losses over $3,000 may be carried back or forward to affect other year tax returns.
- One strategy for mutual fund owners is to sell an under performing fund and buy into a different fund with the same mutual fund company. The effect is to take the current loss without being subject to “wash” sale laws. These laws require a 30-day period before re-buying the same investment.
- Real Estate: In today’s current market, real estate offers tax advantages and may be purchased at reasonable rates. Tax-wise, real estate is a long standing tax shelter. Normally the mortgage interest and depreciation not taxable. This is because the loan will be repaid, and it is not income to the borrower. It is very possible to show a tax loss on real estate, while actually having cash flow. offset rental income for tax purposes. Also, when investors “cash out” of their real estate – receive money at the loan re-financing and put this cash in their pocket – this money is
- Home Based Business: For many, the idea of starting a business seems scary and full of risk. Starting in your home takes some of the risk away by lowering start-up expenses. In addition, working out of the home offers tax deductions for the business that are not allowable personally. Once you start a business, items like cell phone, internet service, automobile, and home office become deductible.