When we are young, we don’t pay nearly enough attention to the ‘grownup’ things such as social security, health insurance, and taxes. It’s only when we become adults that we realize that taxes are complicated but unavoidable, and we find ourselves trapped and overwhelmed. If you don’t want to get headaches when someone mentions taxes, you should try learning as much as possible about the tax laws in your country so that you can save a lot of money over the years. Here’s what you should remember if you want to minimize your taxes:
Trips for business and pleasure
While it’s true that you should keep your private life separate from your business life, when it comes to taxes, it’s convenient to combine the two. When your business trip is at a convenient time, you can combine it with your vacation, thus reducing vacation costs. You can do this by deducting the percent of unreimbursed expenses you have spent on a business trip from the sum of the total costs. This means that you could include airfare as well as a part of a hotel bill, of course, if it’s proportionate to the time you’ve spent doing business-related activities.
Learn IRA rules
When it comes to the USA, their Individual Retirement Accounts are pretty straightforward, which means that everyone has easy access and a simple way to cut their taxes significantly. They do, however, have strict rules: so if you and your spouse don’t have a part in a workplace retirement plan, you are able to contribute to an IRA. If you are younger than 50, you can give $5,500, but if you’re older the amount is raised to $6,500, and simply take that off your taxable income. The best thing is that you don’t even have to itemize deductions. On the other hand, if the two of you do have a plan at work, it’s possible that your deduction is limited.
Americans have another great thing to consider: so-called sales tax or state income tax. People who live in states where they have a state income tax, it’s possible to deduct the amount they have paid in sales tax over the tax year. Still, there are seven states that don’t have the sales tax, but it doesn’t mean that people can’t deduct their sales tax from the year. All they have to do is keep their receipts over the course of the year, and in the end, they can end up with quite a lot of money. It might seem like a drag, but you never know just how much money you can deduct from your taxes until you try.
Australians have something to look forward to as well: their clothes can help them deduce taxes. Of course, this doesn’t mean that all clothes can “do” that, but any clothing that’s occupation-specific, such as uniforms or protective clothing, are included. If you happened to buy something similar, you can claim not only for the money spent but for the costs of cleaning them too. If, on the other hand, your employer takes care of your clothing and keeping it clean, there is nothing you can do. If they give you an allowance for buying and maintaining the uniform, the money has to be shown as part of your own income on your tax return.
Australians who study something that’s related to their work or they happen to be enrolled in eligible education courses that are work-related, they might be able to claim a deduction. Nevertheless, the Australian Taxation Office has strict rules and guidelines, and there is a list of conditions that have to be met as well as the types of expenses that can be claimed. This is the reason why many people decide to consult professionals who are able to help people get a better understanding of their accounts and taxes. Self-education taxes are broken into five categories and many people find it challenging to understand them properly, which is why accountants help them in the first place.
Donations and gifts
Australian Taxation Office has a list of organizations that have a special status. If you donate to a charity that has ‘deductible gift recipient’ status with ATO, you can actually claim for the gifts donated. Your donation doesn’t even have to be in the form of money – you can claim even for shares and property too. People are always happy to hear that any amount above $2 can be claimed back, but when it comes to other assets, there are different rules that apply, and the type and the value of the gift have to be considered.
It doesn’t take long for a person to keep abreast of the tax law in their country, but people dread doing it. Even though it’s boring and often tedious, you can save a lot of money simply by being informed. Your mindset alone can be changed, and if you keep tax reduction in the back of your mind, you will be able to do a lot for your budget without actually sacrificing anything.
Contributed by http://imtaaa.com.au/