Empty Nesters and Tax Deductions
31589
Finance > Taxes
May 17, 2007
54lpbs
Empty Nesters and Tax Deductions
As parents, we work hard all our lives to help our children be smart and wise and independent. Finally, the day comes when they go off into the world on their own. As we proudly wave good by, we realize that for doing such a good job of parenting, the IRS will now penalize us. Now that the children have grown and gone so has many tax deductions such as Personal Exemptions, Child Tax Credit, Earned Income Credit, Child Care Credit, and the College Tuition Credit. To make matters worse, at this point in life many people are at their peak earning and many have homes that are paid off or almost paid off. All this makes for higher income and less deductions which of course means higher taxes. For single parents the problem only increases because there is not a spouse to claim, the standard deduction is lower and if they had children, they usually had some sort of child support that was non taxable and has now ended. What is a person to do? One of the popular ideas is to pour more money into your IRA or 401K plan. As I was passing through a town in Montana, there was a bill board from a nationwide bank, that said, "Retire a millionaire with an IRA." My thought was, "in order to retire a millionaire using and IRA you would more than likely have to put a million dollars into the plan and then hope it doesn't loose money." In defense of the bank, there is a tax deferment on contributing to those types of plans. However, there are limits to how much you can contribute each year. Also, you still have to pay on the money when you take it out and if you take it out early you must pay a 10% penalty. It is interesting to note that 401K plans were originally set up for wealthy individuals to have a place to dump large sums of money tax deferred. Since then IRA and 401K plans have been changed for the average person with the idea that when people retire they have less expenses and would be better able to with stand the tax hit. As time has proven, most retired people have less expenses, but also have less income and so paying the taxes is usually a burden. So, what's a person to do? The secret to paying less income taxes is simple. Find ways to make the things you already spend money on tax deductible. The best way to do this is to turn a hobby or interest into a business. There are many things you can deduct when you own a business that you cannot deduct ordinarily. Look at the example of a person why has a hobby of wood working. This person has a room in their home and has bought many tools and he loves to tinker and make decorative items out of wood. If he turns it into a business, now he can deduct all the tools and supplies he used to make the items. The room you use in your home can be deducted by claiming a percentage of the rent, interest, taxes, utilities, insurance, and repairs to the house. All of those things you are going to pay for whether you have a business or not. Much of your travel expense may be deductible now. As you travel to visit your children and grandchildren you can make the trip deductible by checking on new ideas and materials that will improve your products, attending trade shows, etc. You may travel to craft and trade shows to sell your products. If you choose to sell products over the internet, your internet costs will now be deductible. The list goes on and on. Besides tax deductions, owning your own business can be part of your retirement plan. After you retire, you can keep doing what you love and create income to supplement your retirement and still keep the tax deductions. If you choose a business that you can train others to do, then that business can produce income after you stop and generate passive income to supplement your retirement. The good news is that we don't have to be penalized for being a good parent. There are many laws within the IRS code that we can use to structure our tax situation. Doing the things in life that you enjoy and are passionate about will always create success and joy.
Christopher Anderson feels that peoples' money does them and the economy more good than in the Government's hands. He is dedicated to educationg people on the tax deductions that are available to them. Lone Peak Business Solutions
send email to 54lpbs
Write a Review
Add to My Favorite
Refer it to Friend
Report Article
Other links owned by this user
One of the most confusing things about starting a business is wondering what entity is right for you. Learn some of the pros and cons of Corporations and LLCs.
Category:
Being a business owner has many advantages. Learn why so many people are turning to entrepreneurship.
Category:
Learn the pros and cons of social security vs business ownership when looking for a retirement program.
Category:
There are many misconceptions about credit and how to improve credit. Here are some myths concerning credit.
Category:
By taking accountibility for your life and business you can become more prosperous.
Category:
What you put your attention is what you will see, whether it is abundance or lack.
Category:
There are ways to make your business and vacation trips tax deductible. You need to do certain things.
Category:
Learn how to create more wealth in your life and business by creating value for others.
Category:
You have the power to create your own reality and make your dreams come true.
Category:
11. IRS Email Scams
There are many ways thieves are trying to still other peoples' identity. It is good to know what to do to prevent it and what to do in case it happens.
Category:
There are many activities that will keep children busy and learning during the summer.
Category:
With increasing hazards occurring in the world. It is important to safeguard important documents and records.
Category:
It is important to know what deductions are allowable to businesses. Here are ten most commonly missed business deductions.
Category:
Many desire riches without action. Learn the secret that the wealthy know about being rich.
Category:
When selling a home for a profit, there are always questions on how a home owner will be effected by capital gains. Learn how capital gains effects the sell of a home.
Category:
There are many differences in technique and purpose between Short Stories and Novels.
Category:
Here are the ten most important things a person needs to learn about before starting a trucking company.
Category:
The Law of Attraction is a universal law that can help people alter the life to the degree that they want it to be.
Category:
Other links at Finance > Taxes
How would you like to keep one hundred percent of everything you earn? That is one hundred percent of your paycheck, your savings interest, your inheritance, your winnings and any money given to you from a benefactor. How much would you like never to have
Category:
An income tax is a financial charge imposed on the financial income of entities like persons and corporations. In short, any legal entity who has a value can be taxed which somehow makes sense. To see it in a positive light is to view tax as a contributio
Category:
When selling a home for a profit, there are always questions on how a home owner will be effected by capital gains. Learn how capital gains effects the sell of a home.
Category:
If you're like millions of other Americans who are puzzled by tax laws, don't worry, there is help. And help doesn't have to cost a small fortune. In fact, there are organizations designed to offer tax help to low to moderate income people who are unable
Category:
The UK's Tory Party is producing policy statements to help them win the next Geneal Election. Their plan to reform taxation and abolish inheritance tax could affect the European tax havens of Monaco, Andorra and Gibraltar.
Category:
Site Sponsor
Directory Statistics
Articles: 68252
Categories: 501
Yahoo Entertainment
