Feb 29
Last week, in “More Roth Magic”, I discussed how for people on the edge of a tax bracket, there are some moves that one can make to optimize their wealth (read that - minimize their taxes over time.) Now, as promised, let’s look at schedule A.
From Fairmark, we can see that in 2008, the standard deduction for a married couple filing jointly is $10,900. Let’s think about this. A couple earning $60,000 might live in a house worth $200K, and be paying on a mortgage balance of $150K or at 6%, about $9,000 per year interest. Maybe another $2000 or so goes to property tax. At tax time, their total itemized deductions may just exceed the standard deduction, if that. Now, with a bit of planning, they may be able to use the system to work toward their advantage. In year one, right at the end of the year, make one extra mortgage payment. Not a principle payment, but the next month’s payment. This way the bank will credit the account with having paid that interest in advance. Similarly, go to the tax assessor’s office and pay at least half next year’s property tax bill in advance. They should be happy to take your money and credit your account. Are you generous to your house of worship or other charities? Make your annual donations in January of this year and then again in December of the same year. Now you’ve stacked up your Schedule A deductions to their maximum. Next year, just 11 mortgage payments, no donations, maybe half a year’s property taxes, and you take the standard deduction. Just one way to beat the system, a bit. Let me know what you think.
JOE
written by JOE
\\ tags: charity, property tax, schedule a, Taxes
Nov 26
I’ve always found gift cards a bit odd. Don’t get me wrong, I like gifts and never turn them down. But it seems to me a gift card is the giver’s way of saying, “I wanted to give you a gift, but either don’t know what you want or am too lazy to go buy an actual gift.” Worse, there are amounts you may have a tough time spending in full, say $25 at Best Buy, where you’ll likely have to dip into your pocket to buy two CDs you may have found on sale elsewhere, or just bought the two good songs a la carte on iTunes. To make matters worse, the non-store specific cards carry an ‘activation fee’ that runs as high as $5.95, this for the honor or giving them your money.
Now, I run into an article on CNNMoney that confirms my other thoughts on this topic, 27 percent of recipients never use the card they got. Forget about the cards that have a monthly fee and eventual expiration, over 1/4 of the cards given get lost, forgotten, or just put aside as they are to a store that one doesn’t frequent. My 9 year old likes the gift card, it feels like a grown-up thing to use, like a credit card. But I can do without them altogether. You want to give me a gift but don’t know what to get me? Send a check to the New England Shelter For Homeless Vets in my honor. You’ll get a tax deduction and I’ll feel better knowing the money went to help those in need.
(1/2 update - There are Consumer Protection Laws which apply to gift cards and impact the fees charged as well as expiration times, these laws vary by state.)
JOE
written by JOE
\\ tags: charity, donation, Finance, gift card
