Call Us: 801-802-9020

Plan For Taxes All Year

taxesTaxes have just poked a hole in your wallet.  It’s time to plan for the next round and resolve to make the hole smaller next year.  To do that, you’ve got to prepare the numbers all year long so your tax dude can plug them into the computer and generate your tax return on April 14th.  If you plan for taxes all year, you will see significant savings and keep more money in your pocket.

Above the line and below the line is an important accounting principle that you may or may not be familiar with.  “The Line” is the last line on page 1 of your 1040 form.  It is the adjusted gross income (AGI) line.   Anything that enters into your tax life above the line will add to or subtract from your AGI.

The AGI is a critical part of your taxes, because so many things are based on your AGI.  For example, you can only deduct medical expenses that exceed 10% of your AGI.  If you have a $50,000 AGI, you have to hit $5,000 in medical expenses before any medical expenses can be deducted.  If you have $6,000 in medical expenses, you will only get to deduct $1,000 in expenses from your taxes.  Either way, that deduction is “below the line” so it won’t affect your AGI.

There isn’t much you can do as a W2 employee to affect your AGI.  The only practical thing you can do is contribute to a standard IRA.  BUT, your little company and your real estate all enter your tax stream above the line.  They are your tax shelters.  People who have small businesses and real estate tend to be richer than the W2 wage earners.  One of the main reasons is the small business and real estate give them the opportunity to play above the line.

Think all year: How do I get the deduction above the line instead of below the line? Some things you can do:
  • Buy the computer for the business, not the home.
  • Learn the rules and keep track of mileage used for the regular or real estate business.
  • Use business retirement plans and benefit plans.
  • Make your real estate investments a business.
  • Have a management company.
  • Buy the trash can for the management company, not the home.

This may sound like penny ante stuff, but it all adds up, and some of the retirement plans and benefit plans can put a big dent in your AGI.

My Advanced Tax Tactics will really help you make a dent in your AGI.  But remember that to affect your AGI you have to be working above the line.  Let’s cut taxes 20% this year.  That’s an aggressive goal, but I think we can do it.  Think above the line!
On April 15, 2015   /   LLC and Taxes   /   Leave a comment
Leave a Reply