10 Common Tax Tips Many People Could Plan for and Use

Oftentimes you may hear about some tax tips but as you do some research about them you find that they do not apply to you. For example, a very popular tax tip I hear on a regular basis is to defer your income to next year if the tax rate at that time will be lower than this year’s current tax rate. Obviously, for this to work the upcoming year’s tax rate must be lower on the income in question and you have to be able to afford to do so or in a position to do so. The point is much people would not be able to use such a tip. However, here are 10 tips that you may have a better chance of using if you do a little tax planning.

1. Head of household with qualifying child or parent … If a child is supported by one parent but the child lives with the other parent; then the parent providing the financial support could claim the child as a dependent. The one who the child lives with is qualified as head of household. Also, if a taxpayer is providing more than half the support for a parent who do not live with the taxpayer; then the taxpayer is qualified as head of household.
2. Donate items yearly to Salvation Army… Many taxpayers have personal items at home that they do not use anymore. Donate them to qualifying charity and get a tax deduction.
3. Start and operate a small business… Any taxpayer can start a small business. This is one of the best strategies that could provide legal tax deductions for a taxpayer.
4. Report the office in the home… Most small businesses are operated out of a home. So, if the taxpayer set aside a separate place in the home to do his/her business then the expenses that are applied to that part of the home are tax deductible
5. Pay your child for working for you… Children love to help their parents. If you are a sole proprietor, then hire your children age 17 or younger if they can perform the business function.
6. Open a Roth IRA for the child with the income… This will give your child a head start in saving for retirement while you get the tax deduction.
7. Report uncollectible loans to family members… You can deduct up to $3,000 per year for such loss. The transaction must be well documented and really uncollectible.
8. Deduct depreciation for renting a part of your home... If you have a two family home you can deduct depreciation for the part of the house you rented to a tenant.
9. Keep business and personal expenses separate… It is a good idea to have a separate checking account and or credit card account that you use for business purposes only.
10. Deduct all expenses for running your business… This should be obvious, but every year someone would ask what expenses to deduct for their business? The answer is all the costs of operating your business are tax deductible once you have the supporting documentation.

Finally, if you do not qualify to use any of the above tips for tax year 2015; then now is the time to start planning for tax year 2016. Therefore, use these tips as a guide as you plan to reduce your tax liability legally for the future.