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It's
time to think about those annual resolutions, but this time with a bit of
a twist. Take the traditional resolutions to which you commit each
January, but take those plans one step further and consider some tax
angles. If will power and self control won't keep you focused on your
resolutions, maybe the promise of saved money will help.
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Find
a new job. Some people like to start the new year with a plan for
changing their employment. If this describes you, keep in mind the
fact that expenses associated with job hunting are deductible
expenses. This can include resume counseling, recruitment fees,
printing, postage, telephone calls, travel and meals associated with
interviewing, costs of newspaper and magazines carrying help wanted
advertisements. You must be able to itemize deductions, and only your
job hunting expenses that exceed 2% of your adjusted gross income
qualify for the deduction.
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Go
back to school. Even if you just take one course at a time,
education is never a waste, and it can be downright profitable if it
qualifies you for a raise or a promotion. There are tax benefits that
can work to your advantage when you return to school. The Lifetime
Learning Credit allows students of all ages to take a credit against
taxes for 20% of the amount of higher education cost. Income
limitations exclude higher income taxpayers from claiming this credit.
Alternatively, an education tax deduction is available for employees
who seek to improve their job skills. This deduction is a
miscellaneous deduction, subject to the 2% AGI rule mentioned
previously.
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Help
with a needy cause. Donating cash to a charity is a no-brainer
when it comes to qualifying for a tax deduction. But dig a little
deeper and you may find that the effort you expend donating of
yourself is worth its weight in tax benefits. Hour for hour, you can't
take a deduction for the actual time you spend working at charitable
causes, but the mileage you drive qualifies as a deduction at a rate
of 14 cents per mile, as do any actual costs you incur, such as the
ingredients for the baked goods you prepare for the church rummage
sale, the umpire garb you acquire to help with the little league, the
paints and popsicle sticks you purchase for the girl scout troop craft
projects, and so on.
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Spend
more time with family. The family that works together saves on
taxes together. Consider setting up a home business with the kids as
your employees. You must be able to show a profit, so think up some
money-making endeavor that will operate in the black. Let your family
members help in the planning process. As a side benefit, you can teach
your children the basics of running a business. Expenses relating to
the business become deductible on your Schedule C, the same form where
you will report the income from the business, and there are tax
benefits associated with hiring your children as the company
employees.
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Lose
weight. This resolution probably shows up on annual lists more
than any other item. All that holiday feasting usually leaves in its
wake guilty feelings about being overweight. The general tax rule is
that the cost of weight loss programs is a non-deductible medical
expense. No tax benefit there. But don't let that rule be a deterrent.
The cost of a weight loss program that is recommended by your
physician in order to treat a disease (such as a heart condition)
qualifies as a medical deduction. You must be able to itemize your
deductions, and only your medical expenses that exceed 7.5% of your
adjusted gross income qualify for the deduction. And see the previous
tip about spending more time with your family - perhaps starting an
exercise class in your living room is the perfect family business to
launch your new year's tax resolutions.
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