Pay Less Taxes

President Calvin Coolidge was a man of few words.

It wasn’t that he was shy. Or that he had nothing to say.

But he knew the enormous weight of a president’s words. And he used them carefully.

Like a surgeon with a scalpel. Or an archaeologist carefully brushing the dirt away from a priceless discovery.

So when he said, “Collecting more taxes than is absolutely necessary is legalized robbery,” you know it was something that he deeply believed.

And he was right, of course.

This nation was built to escape the oppression of an overbearing government. Not to create a new one in its image.

So it stands to reason that paying more taxes than is necessary is like robbing yourself.

Which is why I always recommend that you try to…

Pay Less Taxes

One of the most common ways to reduce your taxes is to itemize your deductions.

The current tax system is overcomplicated and bloated. And they count on most folks taking the no-questions-asked standard deduction.

But for many folks, itemizing pays off with a lower tax bill.

You can quickly tell if itemizing will be more profitable for you by checking if your allowable expenses (listed below) exceed the standard deduction for your filing status.

These are the numbers to beat this year:

• Standard deduction for single taxpayers — $6,350

• Standard deduction for married taxpayers filing a joint return — $12,700

• Standard deduction for head of household taxpayers — $9,350.

Note: Taxpayers over 65 or blind earn additional deductions. More information on that here.

Itemizing your deductions will take a little longer than opting for the standard, so make sure you give yourself enough time to work on them.

The deadline for filing your 2017 taxes is less than a month away. Here’s a list of the allowable expenses for itemized deductions:

Taxes

You can deduct any local and state taxes that you paid on your income during the year.

Most folks have to pay state income tax… but you can only deduct it if you itemize your deductions.

Homeowners can deduct their real estate taxes. But you’re only allowed to deduct taxes from the year you’re filing for. Which means no deductions on prepaid taxes.

Home Mortgage Interest

If you own a home, you can deduct the interest you are paying on your mortgage.

This is allowed on up to the first $1 million borrowed on a mortgage. And is allowed for two homes per taxpayer.

You can also deduct interest on a home equity loan less than $100,000.

Medical Expenses

You can deduct the amount of medical expenses that exceed 10% of your AGI (adjusted gross income) — 7.5% if you’re over 65.

Qualifying medical expenses include doctors’ fees, prescriptions, insurance premiums, surgery and physical handicap costs.

Charitable Contributions

If you donated money to your church or any charities this year, you can deduct them on your upcoming tax report.

The deduction is limited to 50% of your AGI for cash donations and 30% of property donations.

Contributions to political campaigns can’t be deducted.

Investment Interest Expense

Investors can deduct fees incurred from brokers, advisers and safe deposit boxes.

But be careful not to overclaim. You can only deduct up to the amount that you earn through your investments.

Gambling Losses

Gambling losses are deductible up to the amount of your gambling winnings for the year. You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction.

Miscellaneous Deductions

You can also claim a whole bunch of what are known as “miscellaneous deductions.” These cover unreimbursed business expenses and other costs that don’t fall into the above categories. But you can only deduct these expenses by the amount they exceed 2% of your AGI.

These expenses include:

• Work-related travel, transportation, meal and entertainment expenses

• Business liability insurance premiums

• Depreciation on a computer or cellphone your employer requires you to use in your work

• Dues to professional societies

• Work-related education

• Home office expenses

• Job hunting expenses

• Subscriptions to professional journals and trade magazines related to your work

• Work clothes and uniforms.

That’s all for now. I hope this helps you lock down a fat tax return this year.

As always, keep sending me those emails. They let me know what you want to read and the problems you need help solving. Click here to send me one right now.

All the best,

Owen Sullivan
Editor, Money & Crisis

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