By month: January 2007
Ask yourself two questions: First, would you like to take a cruise? Second, would you like to get a tax deduction for the cost of your cruise? If you answered “yes” to both questions, this article is for you.
Extenders delay the expiration of a specific tax law, which hides budget costs and allows lawmakers to shirk their responsibility to make good law. We summarize the current extenders to inform you of where you stand with the tax law.
In the latest installment of gimmicky extenders, lawmakers have created a one-year tax benefit window for deducting mortgage insurance. What are the lawmakers thinking? Presumably, they hope the mortgage insurance deduction will boost the housing market in 2007. If this works, look for an extension to 2008.
If you have a business that goes under, and want to deduct it, you will need to prove to the IRS that it indeed was a business, and not a hobby. Assets, rental space, time spent, and other details will support your position.
It is possible to save big on medical insurance if you use the Section 105 Medical Reimbursement Plan. If you navigate the tax law correctly, you might be able to save $4,000, like one taxpayer. Knowledge is power.
Business owners, do not be tempted to “borrow” payroll taxes to contribute to the company. This is not only illegal (with penalties), but might leave you personally liable for the stolen money.
Hiring your children can be a really good move. If you have a sole proprietorship or a husband and wife partnership, you can save a lot of money in taxes. Be careful, though, with corporations, LLCs, estates, and partnerships.
If you make repairs to your home for the purpose of making the home a rental property, you may deduct them, if you do it right. You cannot, for example, deduct repairs made to your home (not rental property). You might also consider filing the improvements as capital expenditures.
Schedule E allows wages, but it does not have a separate line item for them. So, when you are hiring your spouse to work on your rental properties, file the work as “ordinary and necessary expenses to save money on taxes.
If you hire your spouse, you can save a lot of money in taxes by not paying him/her a wage. Instead, cover him/her and your family with medical benefits under Section 105.