Tax time is now officially passed and you've had a month to recover from the assault on your bank account and senses. So, it is time to kick back and relax now, right? Nope. You should be getting your act together when it comes to your taxes for next year.
I am not going to harangue you about getting organized for your 2010 taxes. I am a human being as well. I fully recognize the last thing anyone wants to do at this point is worry about taxes for next year. No, I am talking about something else in regard to getting your act together for 2010 - tax planning.
Financial planners promise you the sun when it comes to investments. Well, we've all seen how that has been working out lately. While few people have made money on investments lately, there is another way to make money in general. You can cut your expenses. What is one of your biggest expenses? Taxes!
Mention tax planning and people often get visions of exotic offshore destinations the rich use to hide money. The picture of Richard Branson water skiing with a nude super model on his back comes to mind. While such scenarios exist, they are not what I am discussing. Instead, I am talking about simple tax planning that can save you a bundle. Let's look at an example.
After eating breakfast, I pop the dishes in the dishwasher and turn it on. I head out into the garage to work on something. A nasty smell reaches me. I come back in to find soapy water all over the floor and smoke coming from the dishwasher. Crikey! I need a new dishwasher. I head off to the local appliance store and end up buying a dishwasher that slices, dices and predicts the future. It costs me $900.
So, what does my new dishwasher have to do with taxes? I just missed a big tax savings. If I had purchased an Energy Star certified dishwasher, I would've been able to claim a tax credit of $300 or so. "Energy Star" is a certification that a device is energy efficient, which the government is promoting. Now keep in mind this is a tax CREDIT. Tax credits are incredibly valuable. They are not deducted from your gross income. Instead, you figure out what you owe Uncle Sam and then deduct the tax credit from that amount. Yep, a dollar for dollar deduction.
This is only one example, but it shows you how a bit of tax planning can make a world of difference in what you pay in next year. Hiring a proactive accountant is really a good move. They can create a strategy for you to use losses, deductions and tax credits to wipe out your tax bill. You can even write off their fees. Now that is tax planning for the regular guy - you and me!