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Over the next 10 weeks I want to share some basic tax tips that can be used for year end planning or thinking about your taxes for next year.

Review All Articles in This Series: 10 Tax Tips


The days are getting shorter. We have more to do. Where is the time? There is no time like the present. When it comes to year end planning for your business, planning for taxes, planning for next year there is no time like the present. Once the year is over, from a tax perspective there is no planning. It’s purely compliance. What did you do and now we have to record it. That’s why the accountants are called bean counters. They count what has been done and they report it on the tax return. And if the IRS comes a calling, the information and the actions taken have all been accounted for.

Occasionally it is possible to take information and re-characterize it in a way that is favorable to you. Was the skin cream you sold as part of Mary Kay or that juice part of Juice Plus a business or just a hobby. Were you really a real estate professional. Did you have to use your home for business and were you running a business or did you get a W-2 from your employer and that’s your income. One and done.

Here are some time honored rules and principles.

1. If the tax rate is going up next year it is usually a good idea to push income into the current year where it won’t be taxed so high. For 2013, in California, the tax laws were changed retroactively to the first of the year to increase how much people pay. This is government tyranny at its best. At least when they change the law for the future people can plan. This is a taking pure and simple. It is hard to imagine that this country was founded to avoid high taxation. For people who make high incomes, the State of California has a mental health tax. Yes, you read that right.

2. If the tax rate is going up next year it is usually a good idea to delay deductions. More deductions, lower taxes, so when rates go up you want more deductions. Does anyone think that with rates as low as they are and with this country running a 17 trillion dollar debt and soon to go up that rates won’t be going up and the government won’t be looking for ways to get money? For a business owner there are many opportunities to increase deductions. Some examples might include the purchase of equipment to be used in the business, separating lines of business into
different companies and taking advantage of different tax rates between corporations and individuals, leveraging real estate, insurance favorable planning strategies, business trips and many more.

3. Look at your investments and sell some of the losers to offset the winners so you reduce the tax on the gain on these investments. I know you will all get a kick out of this one. Passive income and losses from real estate is different from than passive income and losses from investments. Passive losses from real estate have midevil type rules to keep you from taking those losses to offset income from wages or a trade or business. Or worse, income from real estate can’t be offset by losses from stocks. Guess who made up these rules and the effect on you is take more of your money.

4. One I always like is if you drive in your business keep track of the miles you drive. It’s a free one that the IRS gives you. Think about it. The IRS gives you about 50 cents per mile. If you drive 20,000 miles you get a 10,000 deduction and it didn’t cost you anything other than the gas and repairs you would make anyway.

5. Last on the list is if you have your children working in your business there are some tremendous advantages you can use to save taxes.

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