- Sick and tired of such high taxes?
- Can’t get answers to tax questions?
- Want to take control of your taxes?
Then get professional tax help! The author, Wis Laughlin is a former IRS tax attorney with over 35 years experience. If your return has any of the following, save more with Wis:
• Schedule A – Itemized deductions: taxes, interest, contributions or employee deductions
• Schedule B or D – Investment income or gain
• Schedule C – Business or farm ownership,
• Schedule E – Rental properties, Partnerships, LLC’s, or trusts
(Rely on Wis for updates on Tax Reform) White House Fact Sheet.
HOW YOUR RETURN WORKS
Your tax return adds up your Total Income from wages, dividends, interest, investment sales, businesses, rentals and more. Total income is then reduced by Adjustments, such as IRA contributions and Alimony, to find Adjusted Gross Income (AGI). Itemized Deductions and Exemptions resulting in your Taxable Income will reduce the AGI. TAXES include a regular tax up to 39.6%, a 3.8% surtax on investment income, a 0.9% Medicare tax on earnings, an alternative minimum tax and self-employment tax. Taxes can be reduced by certain credits.
Your filing status — Single, Joint, Married Separate, or Head of Household — determines your tax bracket and a number of other tax factors.
PHASE-OUTS: 20+ tax benefits phase out as income rises.
HOW TO LOWER YOUR TAXES!
◊ The basic ways to reduce taxes are (i) to lower your income or (ii) increase adjustments & deductions.
◊ Also, pick the best filing status. “Married separate” status rarely helps. Head of household status saves taxes for a single parent.
LOWER YOUR INCOME
Wages. NOTE: A .9% payroll tax applies to higher-earning taxpayers.
◊ Make retirement contributions early!
Schedules B & D – Investments
For taxpayers in the 39.6% bracket, 20% is maximum capital gains rate.
A 3.8% surtax applies to the net investment income of taxpayers with higher incomes.
◊ Certain expenses lower investment income.
Wis can teach you to:
◊ Cut taxes with qualified dividends and long-term capital gains.
◊ Decrease gains by selling higher basis stocks.
◊ Avoid the Tennessee Hall Income Tax.
◊ Properly report K-1 forms.
◊ Capital loss deductions are limited to $3,000 per year unless used to offset capital gains. Sell appreciated investments in order to offset against your capital losses.
Beware of kiddie tax on kids’ investments.
Sch. C — Businesses, Farms, LLC’s
Make your business or farm a tax shelter.
Wis can teach you to:
◊ Avoid self-employment taxes
◊ Find more business deductions
◊ Analyze vehicles
◊ Save taxes with a home office
◊ §179 deduct or depreciate equipment
◊ Hire your child
◊ Learn special tax breaks for farmers
◊ LLC–Deduct unreimbursed expenses
◊ YEP: Delay billing. Prepay expenses
Sch. E – Rental Properties.
Rental property can help or hurt.
Wis can teach you to:
◊ Deduct the most rental property losses.
◊ Escape the $25,000 loss limit by becoming a “real estate professional.”
◊ Double the depreciation using “components.”
◊ Avoid taxes on the sale of properties.
◊ YEP: Prepay the next year’s expenses.
ADJUSTMENTS TO GROSS INCOME
◊ Alimony – learn how it can lower taxes.
◊ Teacher’s costs.
◊ YEP: Prepay self-employed health insurance.
◊ Contribute to IRA.
INCREASE ITEMIZED DEDUCTIONS
Itemized deductions include medical, taxes, mortgage interest, contributions, employee and investment expenses. Taxpayers with higher income lose some itemized deductions. See my TAX SUMMARY.
Standard Deduction: You take this if higher than your itemized deductions: joint: $12,700, single or married separate: $6,350, head of household: $9,350 (Trump’s tax reform proposals would double this).
◊ (10% floor) Prepay planned medical/dental work.
State & Local Tax Deductions (Trump’s tax reform proposals would eliminate this)
◊ Maximize sales tax deductions.
◊ Boost your sales tax deduction with sales tax on boats and cars.
◊ YEP: Prepay real estate taxes.
◊ YEP: Buy that new car this year.
Watch out for AMT.
How to find them all:
◊ Deduct interest on a second home.
◊ Deduct interest on investment debt.
◊ Mortgage insurance premiums.
◊ Get the most out of an extra/rental home.
◊ Deduct out of pocket expenses.
◊ Fully utilize Goodwill.
◊ Know how much is safe.
◊ Donate appreciated stock.
Employee/Investment expenses (Trump’s tax reform proposals would eliminate this)
Beat the 2% floor on these costs by prepaying next year’s expenses this year.
◊ Know how to deduct countless other items that most are unaware of.
◊ NOTE: Taxpayers with higher income lose personal exemptions. See my TAX SUMMARY.
◊ NOTE 39.6% highest tax rate for higher income taxpayers.(Trump’s tax reform proposals would reduce brackets to three — 10%, 25% and 35%)
Alternative Minimum Tax (Trump’s tax reform proposals would eliminate this)
A 26-28% flat tax that denies many deductions, such as state taxes and employee deductions. To manage the AMT tax:
◊ Shift spending to deductions that work and away from deductions that don’t.
◊ Avoid income spikes.