Tax planning for next year

Today is tax day and last day to file federal and most state tax return . Here are some tax ( and most commonly used deductions and credits) saving tips i got for my Turbo tax software :

1)  Participating in a qualified retirement plan through your employer ( 401k,403b,457 plans ) . Most dollars are saved pre tax basis thereby reducing your taxable income for the year. I guess it is the most common way to save taxes in America .

2) You’re wise to take advantage of the dependent care benefits offered by your employer. That allows you to use pre-tax dollars to pay for dependent care expenses or to receive tax-free employer provided dependent care.

3) Going back to school reduces your tax liability . By  deducting ( or take credits depending on income and type of education ) your eligible tuition and fees, you save a bunch

4) By itemizing your state and local income or sales tax paid you save fed taxes on state and local taxes .

5) Home ownership : itemizing your real estate property tax paid  and itemizing your home mortgage interest deduction.

6) Itemizing your cash and/or non-cash contributions to charitable organizations this year you save taxes on donations

7) Hold your investments in taxable account for more than one year . Applying the lower tax rates on long-term capital gains and qualifying dividends

8 ) Having a child is good for you . Claiming the child tax credit  this year can help you reduce your federal taxes by up-to $1000

Many other credits and deductions are available depending upon your income and situations . See the the link below and plan for the coming year

http://taxes.about.com/od/deductionscredits/Deductions_Credits.htm

Cheapest Woman ever ( The power of coupons )

This lady get the grocery for whole week for family of six for 4$ per week . All this by using coupons and planning before shopping .You have to see this video to believe it. Here is the you tube link

http://www.youtube.com/watch?v=yQNvdKNTZUg

Ridiculous Restrictions from Financial Institutions (and ways to defeat them legally)

IRS

31 day wash sale rule - cannot repurchase a stock or similar mutual fund within 31 days or it negates the writeoff

Ways to defeat: Tax Loss Harvesting - you sell a down mutual fund and buy a “significantly” different fund the same day. With respect to the IRS, the VG Total Stock Market(TSM) and SP500 index funds are significantly different, even though they track eachother at 98% similarity because although TSM holds 5000 stocks, over 80% of it is the SP500 and the remaining 20% have strong correlation to the SP500. You get the loss but maintain market exposure so you don’t miss a potential rally.

Paypal(PP)

has carte blanche in pulling ACHs from linked checking account. This has caused me numerous overdraft charges from my bank, and even though PP reverses the fraudulant transactions, they do not compensate me for the overdraft fees from my bank.

Ways to defeat: After enrolling your checking account with PP, immediately close the account with your local bank. PP requires a linked checking account to be verified in order to work. Then add a second checking account but NO NOT verify it. PP will let you withdraw funds through ACH to the unverified second checking account, but as long as the primary checking account linked is closed at your bank, then PP cannot screw you over.

Checking Account Direct Deposit Requirement

Some banks require direct deposit into a checking account to qualify for free/reduced fees and/or reward dividends. Depending on the institution, this may be done by doing an ACH push from another bank, once a month. Perhaps if you own a MMF at VG, for example, you can set it to automatically deposit monthly dividends into external account - being the checking account you need a DD in. This works on some banks and not others.

Vanguard

60 day restriction on buying any mutual fund after you sell any portion of it:

Ways to defeat: - Setup a one-time automatic transfer from your VG MMF to the mutual fund you want the buy. The intention of automatic investments are that you could dollar-cost average, for example, $100 every month out of your paycheck into a mutual fund. However VG lets you set the frequency interval to “one time” so in essence you have a direct purchase and not an automatic recurring investment. If they ever stop allowing this option, you could simply setup a time interval of monthly and then discontinue the option after the first investment was made. Note that automatic investment purchasing is exempt from the 60 day restriction.

If you know more let me know as comments.

Simple Changes to save you almost $3000

We have put together a list of simple changes to your budget and spending habits. By making these changes you could be almost $3000 better off in a year.

You can earn more money by switching your savings and checking accounts

5 simple ways to save $25000 in this tough economy (Big money saving changes by living frugally)

Economy is in crisis mode right now. People are struggling to save extra money. Here are few tips to save big by making changes to your lifestyle to live more frugally.
- Cancel your cell phone (20% of US population don’t have cell phone) – around $1000 saving per year.
- If you have two cars in family get rid of second car – assuming average cost of 1$ a mile – Total average saving around 10-12K.
- Save money by eating at home – don’t buy prepared meal or eat outside. Average saving of $2500.
- Stop shopping around especially clothing and electronics – average saving $1800 per year per family.
- If you have a college going kid – ask him to plan to attend collage closer to home and live with parents - saving of around $9000 per year on room and boarding.