Tax Minimization Strategies

Disclaimer:  I am not an accountant or a tax professional and any advice here should be verified with a professional before acting upon it.

I’m doing my taxes this week.  It’s going to be painful and I’m not going to like the answers it gives me, but I might as well bite the bullet.  If you’re in the same boat you may be looking for strategies to help you minimize your taxes this year.  There are several categories of expenses that we should consider as possible sources of tax deductions:

Business Expenses

Most of the minimization strategies you will see are for people with small businesses.  You open up a world of deductions by starting a business, however this who area of deductions doesn’t apply to most of us.  Consider starting a business if you have one in mind, but we’ll cover individual deductions instead since they are of the broadest interest.

Tax-Deferred Accounts

Make sure you put any money into your IRA, 401(k), HAS or any other tax advantaged accounts you have.  Not having to pay taxes can be a huge savings by itself.  When you throw in the capacity of some of the accounts to grow tax-free, this is a no brainer.

Unemployment

This is very relevant to all of us in this economic climate.  If you lost your job, many of the expenses that you incur in your job search are tax deductable.  Phone calls, agency fees, travel to potential employers as well as costs for printing resumes may all be deductible.  Be sure to take advantage of any opportunities to lessen your tax burden in this climate.

Medical

If you had serious medical expenses in 2009, you may be able to deduct some of them.  Most people will not qualify, but if you spent more than 7.5% of your adjusted gross income on medical expenses, you may be able to deduct the excess.  Once again, this can be beneficial to those of us who are experiencing this kind of hardship.

Charitable Donations

Be sure to keep these in mind as well.  You may have been glad to get rid of that bundle of clothes, but it also had some value and you may be able to deduct that amount.  Did you donate some money to Haiti?  You may have just wanted to help your fellow man, but why forget to take the tax deduction?

House Expenses

Do you still have receipts for any home improvements you did?  People often forget that these are deductible.  You also of course can deduct mortgage interest as well as property taxes.

Conclusion

Sadly there are not as many deductions available to individuals as there are for businesses.  Still it never makes sense to pay more in taxes than you have to.  Be sure to think back long and hard before you assume you didn’t make any donations or have any home improvement expenses.  They’re very commonly forgotten, but can often add up to a fair savings.  Minimizing your taxes is a great way to make your wealth build faster.  Make sure you take the time to make sure you do it well.

Photo Credit: Scott*Eric

2 Responses to “Tax Minimization Strategies”

1. ETF Funds says:

   April 6, 2010 at 7:55 am

   Trading in ETF Funds is a solid way of minimising tax wehen investing in the stock market.

2. Samantha Milner says:

   April 18, 2010 at 4:27 pm

   Hi guys,

   I knew about most of the deductions. But I didn’t know about the unemployment deductions. I will keep that in mind for next tax season. Thanks for sharing.

   Kind regards,

   Sam
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