No, you can't make a whole year's payments and save more. Be careful that accelerated payments don't throw you into an Alternative Minimum Tax situation.
This post is by Kay Bell at Bankrate.com.
Unlike rent, which you pay beforehand (i.e., your Jan. 1 bill covers your stay in the rental unit for that coming month), your mortgage payments are made at the end of your occupancy period. That means your Jan. 1 mortgage statement represents interest for the month of December, making it a tax-break-eligible bill for this year.
By accelerating that payment even by just a day, you get an additional tax deduction for the interest paid.
Don't get greedy, though. You can't make your February, or any other upcoming, mortgage payment early to boost your year-end tax deduction amounts. Tax law generally prohibits write-offs for prepaid interest (there is an exception for loan points in some cases). Each year, you can deduct only the home mortgage interest for that year.
A new poll finds support for continuing the payroll tax cut and deep discontent with Congress. More voters favor service cuts over tax increases.
This story is by Laurie Kellman of The Associated Press.
Most Americans want Congress to vote to continue the payroll tax reduction, according to a new Associated Press-GfK poll that comes as Democrats and Republicans wrestle over whether to extend the cut through 2012.
It's the latest instance in which lawmakers on Capitol Hill have allowed partisan sniping to hold up a measure to put in place a policy that most Americans support, like ending the Bush tax cuts, cap and trade, and a surcharge on millionaires.
The dragged-out debate over whether to extend an expiring payroll tax reduction is one of many developments that have kept voters furious with their leaders all year. On the brink of the 2012 presidential and congressional elections, virtually all Americans are disappointed and frustrated with the political scene and nearly 6 in 10 say they are angry, the AP-GfK survey showed.
"It seems like there are parties that only want to get their agenda done," said liquor store owner James Jacobsen, 47, of East Hartford, Conn. "They're catering to special interests and not Americans. They are not representing the individual American."
Treatment of short-term and long-term losses is different, but either may get you a reduction in taxable income, and therefore tax owed.
This post is by Kay Bell at Bankrate.com.
Plummeting stock prices can cast a dark cloud over anyone's finances. However, at tax time, these capital losses can produce a ray of write-off sunshine.
When you sell any pharmaceutical flops or banking blunders, you can use them to offset gains from more successful ventures -- or even a portion of your everyday income.
A capital loss is the result of selling an investment at less than the purchase price or adjusted basis. Any expenses from the sale are deducted from the proceeds and added to the loss.
The key point is that capital losses are only losses after you sell them. A stock sitting in your portfolio with a deflated price may cause you distress, but it doesn't do you any tax good until you dump it. (The sale of personal-use property, such as a car, doesn't get this favored tax treatment. Such losses can't be deducted as capital losses.)
States disagree over how deal purchases should be taxed. California has decided to levy sales tax only on what you pay, but New York argues you should pay tax on the full value.
This post is by Janet Novack of Forbes.com.
Good news for California deal-of-the-day addicts: The sales tax they have to pay when they use coupons purchased from Groupon, LivingSocial or other Internet daily deal sites has gone down.
In a special notice issued last month, the California State Board of Equalization said sales tax should be levied only on what a Groupon user has paid for an item, not the list price of the item he’s getting.
So if you paid $50 for a $100 Groupon that you use at a California merchant to buy a $100 item, the sales tax applies to only $50. If you buy a $115 item with that $100 Groupon plus $15 in cash, the sales tax applies to $65 — the $50 you paid to Groupon plus the extra $15 you had to fork over to the merchant.
The new ruling is significant because back in February a spokeswoman for the California BOE, which administers the state’s sales tax, said the board expected merchants to collect sales tax on the full face value of the item purchased — meaning the full $100 or $115. At that time, however, she also said the BOE had asked its legal counsel to review whether its position was correct.
GOP candidate's proposal would cut taxes 62% for millionaires and put a major hole in the federal budget, analysis finds. Gingrich disputes deficit projection.
This story is by Stephen Ohlemacher of The Associated Press.
The tax plan by GOP presidential hopeful Newt Gingrich would provide big tax breaks to the rich and blow a huge hole in the federal budget deficit, according to an independent study.
The analysis by the Tax Policy Center says households making more than $1 million a year would see their taxes drop by an average of 62%. Overall, federal tax revenues would drop by an estimated $850 billion in 2015, a figure that would dramatically worsen the budget deficit unless it is offset by unprecedented spending cuts, the study said.
"The revenue losses are enormous," said Roberton Williams, a senior fellow at the Tax Policy Center.
Gingrich proposes an optional 15% flat tax on income. Under the plan, taxpayers could stay in the current system, which has a top tax rate of 35% on taxable income above $379,150, or switch to the new 15% tax. The new tax would apply to income at all levels, but there would be a variety of tax deductions and credits.
An income of $343,927 puts you into the top 1%. If you make $32,396 a year, you're in the top 50% of wage earners. Check how much each group pays in taxes.
And this comes in the shadow of a government bailout of big banks and a return to the days of gigantic bonuses on Wall Street. Mix in stubbornly high unemployment, a volatile stock market and a barely recovering economy, and it's no wonder that anger over the causes and consequences of the financial meltdown is packing presidential debates with heated rhetoric and filling the streets with protestors.
Undoubtedly, there are big issues here. And we think it’s important for you to know where you fit in. Does your income put you in that at once extolled and excoriated 1% of richest Americans? In the bottom 50%? Somewhere in between?
And, while Warren Buffett says he thinks rich folks like himself should pay more taxes -- and President Barack Obama would be glad to oblige with a millionaire surtax -- one-time Republican presidential candidate Herman Cain had called for throwing out the tax code altogether and replacing it with a 9% flat tax on individuals, a 9% corporate tax and a 9% national sales tax.
It makes you wonder: Are you bearing your fair share of the nation’s tax burden? Do you have a clue what portion you pay now?
67 provisions will end this year, including deductible SUVs for the self-employed, home energy improvements and AMT 'patches.'
By now, you’re probably aware that if Democrats and Republicans can’t reach a compromise in the next few weeks, your first paycheck of 2012 will be smaller as a temporary cut in the Social Security payroll tax expires.
But the payroll tax break is just one of an extraordinary 67 tax provisions that will run out on Dec. 31, including some with broad bipartisan support. (Full list here.)
On the individual tax side, two provisions that together save 26 million middle class Americans from the clutches of the dreaded alternative minimum tax (they're known as the AMT "patch") will expire. On the business side, the research and development credit, beloved by politicians from both sides of the aisle, will lapse.
Some of these disappearing tax breaks may not be renewed — meaning you should consider grabbing them now. So, for example, if you’re self-employed or own a small business and are in the market for a new vehicle, consider buying before Dec. 31. Until then you can write off the full cost of purchasing a new luxury SUV — provided it’s used 100% for business and its gross vehicle weight is more than 6,000 pounds. (More details here.)
If you’re considering making energy-efficient home improvements, get the work done before Dec. 31 to take advantage of an expiring $500 tax credit. (More on this green credit here.)
Virginia legislator seeks to boost space industry by offering a tax credit of up to $8,000 to residents who agree to a 'space burial' of their cremated remains.
Finally, a tax break for the dead. And it's not even in Chicago.
Legislation introduced in Virginia would give residents a tax credit of up to $8,000 for agreeing to have their cremated remains launched into space.
We couldn't find many specifics of the legislation, proposed by Republican Terry Kilgore, but it appears to be a "pre-need" plan that would allow you to collect your tax credit while you're still breathing and able to enjoy it.
"I know there's a giggle factor, but it's time to get over that," J. Jack Kennedy, a board member of the Virginia Commercial Spaceflight Authority, told WTVR-TV in Richmond, Va. "This is about business and job opportunities."
Under the proposal, to be debated by the state's General Assembly next year, taxpayers can get a credit of up to $2,500 a year, for a total of $8,000 for agreeing to have their cremated remains "buried" in space. The tax break would last from 2013 to 2020, and we don't know what happens if you change your mind between the time you get the credit and you actually need to be buried.
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