Maximizing Your Finances with CMM Financial
Top 10 Tax Tips To Maximizing Your Finances
Thank you to our guest writer!
Chris Marble, President
CMM Financial, Inc.
3535 NW 58th St., Ste. 765
Oklahoma City, OK 73112
Well, I have good news and bad news!
Let's start with the bad news. Taxes are your biggest expense in life! Not only do you pay income taxes, but you also pay sales taxes, payroll taxes and most likely property taxes. This leaves the vast majority of taxpayers feeling like they have been gouged on taxes, and rightfully so.
Now, on to the good news. While most people believe that the majority of the tax code is dedicated to bleeding them out of every penny of their hard-earned money, this could not be further from the truth. 99.5% of the 5,800 pages of the tax code are dedicated to tax deductions and only 0.5% of the tax code is dedicated to taxation. Since the inception of the U.S. tax system, the government has developed a large laundry list of tax deductions to encourage taxpayers to spend their money in certain ways that will stimulate the U.S. economy. The tax code undergoes a lot of changes every year and is extremely complex and, for that reason, it is important to align yourself with a tax firm like CMM Financial to assist you in maximizing your finances and minimizing your tax liability.
Below is CMM Financial's Top Ten list when it comes to taxes. While this list is not comprehensive, it is a good starting point to help you keep more of your hard-earned money in your own pocket.
1. Business Structure
It is critical that you structure your business in a way that will prove to be the most advantageous in lowering your taxes and at the same time provide you with the best liability protection. Currently, your business can be structured as either a Sole Proprietor, an LLC, a Partnership, a C-Corporation or an S-Corporation. A qualified tax professional should be able to easily explain which type of structure will provide the best incentives for you.
2. Add Your Spouse To Your Business
By adding your spouse as an officer in your business, you are able to increase your business deductions, by taking qualified business expenses that they incur as well.
3. Track Your Vehicle Deductions Properly
You can either report business mileage or depreciation and actual vehicle expenses on your tax return. Which way provides a better tax deduction? The answer is, it depends. You could also fall into the trap of going with the option that benefits you the most on your current year's tax return, but will not benefit you the most on your subsequent tax returns. We recommend that you discuss how to deduct your vehicle with your tax preparer.
4. Deduct Your Home Expenses
When you are self-employed, you can deduct a portion of certain home expenses as business use of the home. There are a couple of different ways that you can report home office deductions on your tax return.
5. Employ Your Children
Give your children roles in your business and compensate them for it. They are going to be in a lower tax bracket than you, and there are ways that you can pay them directly to savings strategies (college and/or investments) that will provide you with more than one deduction at the same time.
6. Invest Wisely
The majority of investors are solely concerned with the rate of return that they are generating. It is possible to have a slightly lower rate of return and end up with more money at retirement age if you take into consideration how you structure your retirement portfolio. A few of the options that are available are Solo 401K, IRA, Roth IRA, and SEP. Each of these options have a different impact on your tax return both now and in the future.
7. Get Involved in Real Estate
Go beyond just being a homeowner and acquire either rental properties or investment properties that you intend to remodel and flip. This is a great way to provide yourself with an additional stream of income and at the same time explore even more tax write-offs. There is even a way to not have any capital gains on your profit when you go to sell one of these properties.
8. Travel For Work
Almost everyone enjoys traveling, but traveling gets even better when you can deduct it on your tax return. If you conduct business while you away or further your business education, then there are certain travel expenses that you can claim on your taxes.
9. Keep Meticulous Records
This step is vital. When a taxpayer does not know what they can and cannot claim on their taxes, they invariably short change themselves on tax deductions. The reason that most taxpayers are overpaying year after year in taxes is simply because they are not aware of how they can best exhaust the tax code in their favor.
10. Ask Questions
There have been countless times that additional tax deductions have been found and reported as a result of the taxpayer asking if a certain item would be considered tax deductible or mentioning a recent purchase that they had made.
We hope that this list has provided you with some valuable information to start your process of mastering your finances. If we can be of further assistance to you in achieving your long-term financial goals, don't hesitate to contact us.
Interested in more tips to prepare for your financial future? Read more on the Verbode blog.