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Started By
Message
Suggestions to lower taxes in 2016?
Posted on 4/19/16 at 11:01 pm
Posted on 4/19/16 at 11:01 pm
I wrote my annual check to the IRS on Monday. It seems to get more painful every year. I asked the lady that did my taxes if she had any suggestions on how I could reduce my taxable income. Her response was basically, lower your income. Since that is not really a good option, was wondering if anyone knew of any special deductions that can be taken this year or approaches you have used. I have charitable donations, home mortgage interest, and rental property expenses already. Unfortunately I'm not allowed to take advantage of the child tax credit or college related expenses due to my income.
I can remember a few special tax incentives over the years. Seem like there was a tax credit if you bought an SUV for a business one year. I think you can still right off a portion of energy efficiency items for your home such as upgrades to windows. I personally took advantage of the $6,500 tax credit to buy a certain golf cart classified as an electric vehicle about 5 years ago. (We called it our Obama cart. It cost about $7,000 to buy and began to immediately fall apart. Of course the company went bankrupt that assembled it.)
Anything suggestions on approaches that work for you?
I can remember a few special tax incentives over the years. Seem like there was a tax credit if you bought an SUV for a business one year. I think you can still right off a portion of energy efficiency items for your home such as upgrades to windows. I personally took advantage of the $6,500 tax credit to buy a certain golf cart classified as an electric vehicle about 5 years ago. (We called it our Obama cart. It cost about $7,000 to buy and began to immediately fall apart. Of course the company went bankrupt that assembled it.)
Anything suggestions on approaches that work for you?
6
Posted on 4/19/16 at 11:33 pm to Ramblin Wreck
I got the same response from my tax lady this year. I owed 12k after paying over 100k throughout the year. It blew my mind when she said the only option was rental properties or make 120k less per year. Think I'll be looking for a new tax lady this year.
This post was edited on 4/19/16 at 11:36 pm
Posted on 4/19/16 at 11:39 pm to Ramblin Wreck
Is this where we come to brag about our income?
Posted on 4/19/16 at 11:53 pm to Ramblin Wreck
You didn't mention 401k but I assume that's because you're past that as well.
Start taking your income from capital gains like the real ballers do.
Start taking your income from capital gains like the real ballers do.
Posted on 4/20/16 at 12:31 am to Teddy Ruxpin
For W2 employees the options are tight. Max 401k. Max HSA. That gets you about $21k in deductions.
...then it gets more complicated.
...then it gets more complicated.
Posted on 4/20/16 at 5:46 am to Ramblin Wreck
Are you self-employed?
Posted on 4/20/16 at 6:39 am to iknowmorethanyou
quote:
Are you self-employed?
No, but I do own rental property that I can justify listing expenses against.
Posted on 4/20/16 at 6:51 am to Ramblin Wreck
Posted on 4/20/16 at 7:43 am to Ramblin Wreck
About all you can do on the rental is get it to zero due to passive loss limitations. Honestly if your accountant told you there's nothing you can do, she's probably right. Assuming your pre-tax deductions are maxed out. You get to an income level where the o ly options are make less or spend more.
Posted on 4/20/16 at 8:02 am to I Love Bama
That is actually a pretty good decision chart. It doesn't apply to my financial situation, but I think I'll modify it and save it as a reference.
Posted on 4/20/16 at 8:22 am to lynxcat
Here is another question - Next year I will have all three of my kids in college at the same time. I don't get the benefit of deducting college related expenses. My plan years ago was to use rental income to pay for them. As it turns out, all three wanted to go out of state to the same college, which doesn't bother me since grandparents are an hour away. I'm a long shot from $150K per year in rental income, so we have allowed them to take out small student loans to cover what we can't afford. Rather them using student loans, would it be better if I took a line of credit as a second mortgage? At least the interest would be tax deductible, or would it? Just trying to be creative.
Posted on 4/20/16 at 9:45 am to Ramblin Wreck
Would all 3 kids be willing to live together? Might be beneficial to just buy a house/condo near the college and take the mortgage/property tax deduction the years they are in college.
Posted on 4/20/16 at 10:05 am to Rize
quote:
only option was rental
Rental deductions are limited to rental income once your AGI reaches 150k.
Posted on 4/20/16 at 10:59 am to Ramblin Wreck
quote:
ather them using student loans, would it be better if I took a line of credit as a second mortgage? At least the interest would be tax deductible, or would it? Just trying to be creative.
Technically speaking, home equity/second mortgage interest is only deductible to the extent the proceeds are used to acquire/renovate a real property. However, the mortgage interest statement comes out all the same and I've never seen an audit where an agent asked what the loan proceeds were used for (not to say it would never happen)
I echo the comment about buying a house for your kids in college if you can financially swing it. You will probably save money on room and board, and, for now you can treat it as a second property and deduct the mortgage interest and real property taxes on Sch A. Of course, if you are making over 300K and are thus hitting the overall itemized deduction limit, it might reduce this benefit a bit. But I still think it may be cheaper for you, if you are paying room and board / rent expense for all of the college kids.
Your options are somewhat limited as a W-2 employee. You have all the Sch A stuff, HSA, retirement plans. Rentals will the passive loss limits above 150K in AGI.
If you are in Louisiana and your income is high enough, consider film credits, it will save you a bit on state tax. But most film credit brokers require a min amount of 10K of credits. If this is workable for you, adjust your LA withholding. Historic tax credit purchases are another LA option to save a few bucks.
Solar Panels options WERE a good idea if you were in LA, but that ship has sailed. The federal credit alone is probably not worth it.
This post was edited on 4/20/16 at 11:01 am
Posted on 4/20/16 at 11:17 am to LSUFanHouston
Thanks for the suggestions. I live in Texas so don't have to worry about the state income taxes. I've considered buying a property for the kids to live in. My main concern with buying in Tuscaloosa (sorry LSU folks - hope you don't hold that against me) is that it appears to be over built with apartments near campus. To pay a decent price on a house I would need to move them either about tens miles from campus or in a questionable neighborhood. (You don't have to drive too far from campus to hear gun fire periodically.). Resale would be a big concern in a few years. Still something I need to strongly consider.
Posted on 4/20/16 at 11:40 am to Ramblin Wreck
Have you considered contacting a tax attorney in Panama?
Posted on 4/20/16 at 11:42 am to Ramblin Wreck
Yeah, the 2011 tornado took out a LOT of student houses and they've replaced most of them with apartments. The apartment boom had started before that, but it has exploded since and it seems it has outpaced the student growth.
I would think you could still find some value in the Forest Lake area. It's still close enough to campus to be attractive to investors looking for rental properties, and there are so many rentals there already it scares away a lot of buyers looking for a residential home. I've been away since I graduated in 98 though, so I'm not as familiar with the Tuscaloosa market. Seems the city is also trying to clean up the Alberta City area, which was hit HARD by the tornado and had gotten pretty sketchy. Kind of a contentious issue though as the area was predominantly black and it seems there's a city led effort to use the tornado to gentrify it.
I would think you could still find some value in the Forest Lake area. It's still close enough to campus to be attractive to investors looking for rental properties, and there are so many rentals there already it scares away a lot of buyers looking for a residential home. I've been away since I graduated in 98 though, so I'm not as familiar with the Tuscaloosa market. Seems the city is also trying to clean up the Alberta City area, which was hit HARD by the tornado and had gotten pretty sketchy. Kind of a contentious issue though as the area was predominantly black and it seems there's a city led effort to use the tornado to gentrify it.
Posted on 4/20/16 at 11:44 am to I Love Bama
Well Bama, that decision chart makes me feel really good about my current financial state considering I haven't hit 30 yet.
Posted on 4/20/16 at 12:26 pm to The Spleen
quote:
outpaced the student growth.
My initial plan when my oldest enrolled there was that we'd be able to get in state tuition eventually. With family living there and one of the rental properties I own is a condo in Orange Beach. Thought I'd be able to claim it as a partial residence. Unfortunately that is pretty much an impossibility to get.
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