Tax Saving Strategies for Individuals

Copyright Robert Lee Riley, all rights reserved, do not duplicate without permission of author.

...obtain from me a copy of my Tax Data Organizer for a detailed list of tax saving ideas.

...I recommend that you use Quicken or Quickbooks Pro, or Microsoft Money, etc. Charge everything, or use a debit card. Sign up for the travel mileage credits. Post your expenditures monthly directly off the card statements and your checking account statements. Quicken VISA automatically downloads to Quicken/Quickbooks. Use the account categories as shown on my Tax Data Organizer.

...max out your pension plan contributions. Generally, you want a Roth IRA if you qualify.

...if you have a very low income year, you may want to roll over your regular IRA to a Roth. You have to pay tax on the rollover but it can be worth it in the long run.

...IRA contributions are due April 15th.

...contribute to a spousal IRA for your spouse who does not work.

...if you are in a pension plan at work you can contribute to a nondeductible IRA, or a Roth.

...take $10,000 out of your IRA to purchase a first-time home.

...accelerate capital losses and delay capital gains.

...adjust your stock/mutual fund sales to maximize capital gain treatment. The capital gain holding period is one year.

...when you sell shares of stock, or a mutual fund, notify your stock broker, or mutual fund company, and sell the most recently purchased shares. Those shares will probably have a higher cost basis and the gain may be less.

...use the $11,000 gift tax exclusion to shift income to your hiers.

...invest in treasury notes and bills because the income is free from California tax.

...consider tax exempt municipals only if your income is high.

...keep track of mileage driven for job hunting, business, medical, and charitable purposes. Use your appointment book or Palm Pilot.

...use a home equity loan instead of credit card debt because the interest is tax deductible. Purchase your car using a home equity line of credit rather than a bank loan, if possible.

...deduct your away from home travel expenses for business and investment travel.

...deduct entertainment expenses for job hunting, networking, business development, and investment. If you "live to work" then many expenses which at first may appear to be personal in nature, may be perfectly legal tax deductions.

...the IRS does NOT require receipts for expenditures less than $75. Still, record such amounts contemporaneously in your Palm Pilot.

...you do NOT have to record every business mile you drive. You may, for example, estimate your auto usage once a quarter and prorate it over the entire year.

...use your PDA or appointment book to substantiate auto usage. Post it as often as you can.

...employment tax returns are required if you pay more than $1,100 per year for child care in your home.

...interest on a boat or mobile home may be deductible.

...travel for investment purposes, such as looking at real estate, is deductible if you spend more than 6 hours per day  - gather brochures, business cards, maps, etc.

...travel for charity is deductible. Check out; globalvolunteers.org, or, oceanic-society.org. Your work must be "meaningful and substantive."

...the rules for vacation/business travel and job hunting are complex - see my Tax Data Organizer page 6.

...meals eaten alone when travelling are deductible (for business/investment travel).

...lost your receipts for travel meals? Take the IRS daily allowance; $30 to $46 per day.

...buy a car or truck that weighs more than 6,000 pounds because the depreciable life is 5 years instead of 20 to 30 for many cars.

...never trade in a car. Instead, buy and sell in separate transactions even if it is with the same dealer. You can then write off your undepreciated cost basis.

...rental property that you own and manage yourself is still one of the best tax favored investments.

...if you have incentive stock options try to avoid the cashless transaction method. Instead, write a check to exercise your options.

...interest on a boat or mobile home may be deductible if there is living space - the second home rules apply.

...expenses paid for with a credit card are deductible in the year you make the charge, not in the year of payment. So look at your January statements for December charges.

...do not forget to deduct casualty and theft losses even if the property is personal.

...you can lower your audit profile by extending your tax return and filing after April 15th. The IRS system often becomes overloaded later in the summer and they are less likely to pull your return for audit.

...donate appreciated property (e.g. stock) to a charity, and some schools,  and take a deduction for the fair market value of the property. There is a one year holding period rule.

...mortgage points - new home; deductible, refinance; amortize over the life of the loan, but write off any unamortized points.

...if you have a boat or swimming pool, or you are giving a party, deduct the variable costs of the event. If 4 of 10 people are business associates then deduct 40%.

...in some cases, you can borrow against your 401k, or pension plan, and purchase a home.

...the gain on the sale of your home is tax free up to a point; $250,000/500,000 (single/married) subject to the 2 of 5 year rule. Excess gain is taxable so keep receipts for home improvements made over the years of ownership.

...hold title to your home as community property and receive a joint step up in basis from the decedent.

...do not believe a car salesperson who tells you that leasing has tax advantages. Remember, you pay sales tax on the lease payment so sometimes it costs more. Add up the net cash outlays over the term of the lease and compare to the net cash outlays for purchase over the expected holding period. If you pay a large lease deposit, it is written off over the term of the lease - not up front.

...consider putting your life insurance policies into a life insurance trust to reduce estate taxes.

...annuities grow tax free - but invest in annuities only after you have maxed out on your IRA and pension contributions.

...if you have an IRA, or pension plan, you need to review the plan documents and properly designate a beneficiary.

...to be continued as time permits, check back.
Cell: 415 308-0678
Fax: 415 704-3238


Lee@RileyAccounting.net


1001 Bridgeway, #229
Sausalito, CA 94965


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Robert Lee Riley CPA, MBA-tax
Riley
Accounting