TAX SAVING TIPS

Tax

The best approach to tax planning is to start early in the year. Some strategies can help you lower your taxes, sometimes by thousands of dollars. Some help you save time and money when preparing your tax return. Other strategies help you avoid costly penalties and interest on both federal and state taxes.

Contribute to retirement fund (401k): I always suggest people to contribute more towards the retirement fund as it’s a savings which will help you after your retirement, when you don’t have any income. If you're eligible, you can still contribute to an individual retirement account. Making a deductible contribution will help you lower your tax bill this year. Plus, your contributions will compound tax-deferred. It’s hard to find a better deal.

Child and education: You are allowed to deduct up to $1000 for each child under age 17. Child tax credits and education credits have been more generous in recent years.  That means more tax-savings opportunities for parents of children; especially those with dependents attending a college or university.You can deduct up to $4,000 for higher education tuition and qualifying fees.  This deduction is phased out starting at $80,000 for single filers and $160,000 for joint filers. If you're a working parent, and paying for the care of a dependent under the age of 13, then you may be eligible for the dependent care tax credit for all qualifying expenses.  In 2010, the maximum credit you can take is between 20 to 35% of qualifying expenses, with a deduction cap of $3,000 for one child and $6,000 for two children.

Business expenses (or employee expenses): Even if you don’t own a business, you may be are still eligible to deduct business (or profession) related expenses if you incure some expense for your job and your employer didn’t reimbursed your expense. For example, travelling expenses related to your job.

Home mortgage loan: The interest you have paid during the year on a home mortgage or a second home mortgage may be tax-deductible. Since home-loan payments are often a large expense, this deduction can amount to hundreds or thousands of dollars in savings. Only one second home or vacation home can qualify for a mortgage interest deduction. Stat property and real estate taxes are also deductible from your federal tax.

 

Defer income: If you have any income from any investments or incurred any expense related to it, you can claim them as a deduction.

Money Hack Tips

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We had already discussed about some money saving tips and I thought it will be good to discuss about more tips for saving money.

1.       Stay home: The more you stay at home the more you save the money. Enjoy your days in home. Stay in home during the weekends.

2.       Make a list: Stick a paper in your kitchen or bed room. Note down each and everything you want to buy. You can track your expenses. At the end of the month analyze it and check out the any unwanted expense.

3.       Wait for a week: If you want to buy something, wait for a week. In a week you can realize its importance. Another important point in waiting is that you won’t have the same excitement that you had a week ago but you will use it effectively.

4.       Avoid watching Advertisings: Don’t watch the advertisements. All kind of advertisements like  TV advertisements, email announcement, road side banners etc.  That will tempt you to buy a something you don’t want.

5.       Use cash: Use cash wherever possible. We have already discussed about the benefits of using cash for credit cards. Try to avoid cards as much as possible.

 

Retirement Fund

Retirement accounts are the excellent way to save your money for your future. It is important for you to know about the how your retirement fund works.

It is important for you to think about the day when you will retire. You may get another job or not but it’s good for you to have a safety for retirement. For most of the people retirement fund can be the only source of income after retirement. You will be forced to work even after your retirement if your retirement fund is not enough for. There are many reasons which can affect your future even if you have a luxurious life now. Inflations, taxes, rising in cost of living etc can cause your future. It is always advised to prepare your retirement plan. Another fact is that contributing towards your retirement account is eligible for tax deduction. Which means you can save some tax money by contributing for your future. Even part time employees are eligible for retirement funds if they work for a minimum of 1000 hours a year.

The first thing you need to do is to understand the retirement plan by your employer. There are many types of plans and your employer may have one or more types of plans. You should verify the types and the requirements. You should determine your financial position after your retirement and also determine your needs after your retirement. Then prepare your retirement plan with the information. If you don’t know to plan or got any problem in planning then provide your information in Ask Moran section. I will help you in preparing your retirement plan.

There are plenty of retirement plans. There are two major types of plans and all the other falls in these two categories, defined benefit plan and defined contribution.

 In the defined benefit plan you are assured by the employer for specific monthly benefit after retirement. It is calculated on some basis. For example it may be 5% of your average salary of for last 3 years of employment.

In the defined contribution plan you and your employer contribute some percent of your salary to your account. Generally those contributions are invested. The best example for defined contribution plan is 401(k).