Tax services best services from Houston? Why Change the Character of Your Income? One way to reduce your tax burden is to change the character of your income. If you’re wondering why you should do so, here are some of the ways it can help you to lower your tax bill. Convert your SIMPLE, SEP, or traditional IRA to a Roth IRA. If you are over the age of 591/2 and you meet the five-year rule, Roth distributions are tax free. Because they are not considered investment income, they will not increase your modified adjusted gross income (MAGI), which is used to calculate the 3.8% Medicare surtax.
You probably know your Social Security number, but do you know the Social Security number of each dependent you claim? You’ll want to jot those down, along with any other information your tax preparer is likely to need. For example, if you own a vacation home or rental property, note their addresses. If you sold a property in the past year, note the dates you bought and sold, the amount you originally paid, and how much you received from the sale.
Bonus depreciation is an extra benefit for buying assets. The TCJA also increased this tax break from 50% to 100% of cost for assets placed in service from September 27, 2017 through January 1, 2023. Talk to your tax preparer if you’ve purchased any major assets to find out if you qualify. You can deduct up to $25 per person of the cost of gifts given to customers and vendors. An exception exists for those that bear your business name, are distributed as a matter of course, and cost less than $4. Deducting the costs of entertainment is a bit trickier if you show your appreciation by paying for a good time. These costs are no longer deductible unless the event is directly related to your business in some way. See extra info at tax help in Houston.
Harvest Your Capital Losses: If you own stocks that have lost money, you can sell them and deduct up to $3,000 on your federal taxes. Just be careful not to violate the wash-sale rule, which would disallow the deduction. This rule states you cannot purchase the same or a substantially similar stock within 30 days before or after the sale. “Some people think it’s OK if I do it using two accounts,” Zollars says. They may think they can sell a stock from a taxable account and then immediately purchase similar securities in an IRA. However, this is not allowed. “That’s not the way the rule works,” he says.
Document Everything. While talking to the customer about the outstanding debt, take careful notes about everything that was discussed, including the customer’s comments in case there is a future debt dispute. If your company has tracking software, input everything into the system while the conversation is fresh in your mind. Over time, continue to add any additional details to your file to keep it as up-to-date as possible. Debt collections are common, especially in difficult economic times. Using these collection techniques should increase your odds of success. But, if all this effort doesn’t result in getting paid, you may want to use the services of a reputable collection agency.
Slow Down to Save Taxes. If you buy a house or condo, fix it up and then sell it in less than a year, you’ll pay taxes on the profit at ordinary income tax rates (10%, 12%, 22%, 24%, 32%, or 35%) based on your income. Hold it for more than a year and you’ll be taxed at the lower long-term capital gains rates (0%, 15%, or 20%), depending on your income. You may decide it is worth it to you to flip the property quickly, but if you get caught in a slower market and can’t unload it quickly, you’ll save a lot on your taxes by holding it more than a year. Read more information on https://greentree.tax/.