We are starting to move in on tax season as all the earnings statements have been sent out and any corrections from financial institutions have found their way through the mail. For the majority of folks, tax time is relatively painless as there financial situations have been stable. Many folks do not file taxes leaving money in government coffers. Others have an elaborate system of tax shelters and advanced planning to reduce the tax burden considerably.
For the rest of us tax time is a little bit of work. It begins with collecting income sources mostly wages and some interest income, etc. Next is itemizing deductions, which for most of us includes the mortgage and a handful of charitable contributions.
For those with investments a schedule D is typically straightforward. However tax savings abound in this department with some planning. Planning includes offsetting gains with losses, resetting cost basis and selling shares with a higher cost basis. Also it is important to consider long and short term holdings.
Finally an interesting item of note is small businesses. These have been dubbed the little guy’s tax shelter as opportunities abound to reduce taxable income. Even home, car, computer, meals and entertainment can be wholly or partially deducted following some strict guidelines. Many of us have hobbies or interests that would not be too much of a stretch to turn into a small business. Also there are many going concerns that would be a reasonable investment if one needs a tax shelter.