Before jolly old St. Nick ascends your chimney to finish his global journey for the good little boys and girls, an army of blue blazers is preparing to launch the 2007 Form 1040 mailers toward your home. If you're self-employed, RSVP with some smart year-end tax preparation strategies that will reduce the pain of next year's tax filing, and keep some money in your pocket to pay for the Christmas presents you've charged on your credit cards.
Here are a handful of tips you 1099 income earners can use to extend the yuletide cheer into early next year, IRS-style.
1. Buy A Pickup Truck or SUV: The operative word here is "qualifying". If you buy and put into business service a "qualifying" pickup truck or SUV on or before December 31, 2007, you may add a hearty deduction. For qualifying pickup trucks (Gross Vehicle Weight Rating of 6,000 pounds or more, bed at least 6 feet long and not readily accessible from the cab), you can deduct up to $125,000 of its costs as a Section 179 business expense this year. You must substantiate the percentage of your total mileage this year that constitutes your business mileage, and you can multiply that percentage by the cost of the truck and deduct that amount as an expense, plus your first year depreciation. Same goes for an SUV, except the deduction caps at $25,000, and the rules for what qualifies as an SUV should be explored. Learn more about SUV deductions at www.irs.gov.
2. Prepay Business Expenses for 2008 Before December 31, 2007: You can prepay many business expenses (that is, money you'll spend next year anyway) up to 12 months in advance for 2008 during 2007, and deduct them now. Do this year after year, and you can save substantial sums on your taxes. Better still, invest the savings and fund your retirement in part with money that you were going to spend anyway on business expenses. Good idea, eh?
3. Accelerate Your Marriage, Slow Down Your Divorce: If you're married as of 12/31/2007, you can save by filing as a married taxpayer, so perhaps hold off on divorcing a few more weeks, or if you were going to marry in January, 2008 anyway -- assuming you're ceremony will be smaller or less formal and easily movable -- marry in December, 2007.
4. Dave Ramsey Might Not Like This One, But Do It Anyway: Charge large business equipment expenditures on your credit card. The deduction is good as of the date of the charge, even though you will not pay until next year. Keep Dave and your bottom line happy, though -- pay the debt quickly. In general, you can spend up to $125,000 per year on business expenses and deduct that amount from your income.
5. Hold Off On Collecting Income: Assuming you're cash crunch can tolerate it, delay collecting debts owed to you until after December 31, 2007. Effectively move taxable income over into next year. The principle involved is the same as the prepayment of business-expense strategy: do this every year, realize larger savings, invest those savings, and fund part of your retirement with them.
Use one or more of these strategies to make the joy of the holiday spread into the malaise of the first quarter of 2008. For more information on how you may do more of your own tax-planning, Google "year end tax strategies" and visit the websites of companies like Bradford and Company and SmartBiz.
WORLD - CULTURE
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The Other Holiday Visitor
Santa Claus isn't the only guy scoping out our homes this season. So is the IRS. Plan a warm welcome for the guest of honor.
Copyright © 2010 GreatMinds
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