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Please share any information you have on tax shelters for the working class. Unlike Obama, I'm not rich. I work for a living. I need to lower my income taxes or I might as well quit my job on January 20th and sign up for the bread and circuses.

Make contributions to your 401(k) if your company has one.
Make use of a flexible spending account if your company has one.
Tax deductible charitable donations.
Traditional IRA.

KC5AV wrote:Make contributions to your 401(k) if your company has one.
Make use of a flexible spending account if your company has one.
Tax deductible charitable donations.
Traditional IRA.

+1 A good investment counselor will help you a lot. If your income is the level that you need tax breaks, you need an investment counselor. Get some recommendations from someone you trust that has done well with theirs.

The suggestions above are good.

1. Know what your federal income tax rate really is. Many people look at the total deductions instead of the actual percentage of income that they pay in taxes. Most wage-earners pay more in Social Security and Medicare than income tax.

2. If you use a program like TurboTax, it will find all the deductions and credits that are available to you. There are a bunch of obscure ones.

3. Don't fall for scams. There are people out there hawking schemes that are illegal and will probably get you slapped with a fine by the IRS.

- Jim

Best tax advice I've ever had.... turn your "hobby" into a "business"

You have to do it right or else you'll get nailed by the IRS, but the benefit is .50 a mile write off for vehicle, everything you buy for the biz, travel for biz training, seminars and such.... way too many things to list here.

The IRS says you have to have INTENT to earn a profit. So conduct your business properly and whether you make money or not, you still can take the tax breaks.

Yeah, yeah, I know, there's a rule about 5 years of loss, but any REAL business should turn some profit. And if you write-off all of your expenses and make $1, you earned a profit.

Check with your CPA, your mileage may vary.

Thank you for the suggestions. I should be more specific. I used turbo tax for years. I know about highly publicized tax loopholes like 401k/IRA, home ownership, getting married, having kids, etc. I'm looking for advice beyond the standard stuff that's in internet, newspaper, and magazine articles every tax season. The business suggestion is not allowed in my current situation but maybe if I quit my job on January 20th and sign up for the bread and circuses.

Thank you everyone.

Keith B wrote:

KC5AV wrote:Make contributions to your 401(k) if your company has one.
Make use of a flexible spending account if your company has one.
Tax deductible charitable donations.
Traditional IRA.

+1 A good investment counselor will help you a lot. If your income is the level that you need tax breaks, you need an investment counselor. Get some recommendations from someone you trust that has done well with theirs.

Actually 401K's aren't safe anymore
http://www.lazymanandmoney.com/5-reason ... your-401k/" onclick="window.open(this.href);return false;

Do you think taxes will be LOWER on your 401K once 0bama starts doing his thing?

http://www.investorsinsight.com/blogs/f ... 401-k.aspx" onclick="window.open(this.href);return false;

Be afraid..be VERY afraid!

aardwolf wrote:I'm looking for advice beyond the standard stuff that's in internet, newspaper, and magazine articles every tax season.

If you have some kind of periodic non-employment income, like bond premiums, you can transfer them to your minor children. Then you can pay tax at the kid's lower rate.

There are limits on how much income you can transfer this way, and other tricky aspects that require the advice of a professional.

If you have a wad of money to invest you can invest it in Treasury or municipal bonds that are tax-free. You probably already know that.

If you're an employee, don't own a business, and don't have a lot of income from other non-employment sources, there's not much you can do beyond those things you mentioned. There's a reason for that. Most of the tax shelters that used to be available were eliminated during the Reagan administration. Congress hasn't managed to put them back in.

Anyway, if there's another way that you can reduce your taxes given your financial situation, a professional may be able to tell you about it.

- Jim

Unnumbered offshore accounts?

KC5AV wrote:Make contributions to your 401(k) if your company has one.
Make use of a flexible spending account if your company has one.
Tax deductible charitable donations.
Traditional IRA.

A Roth might make sense now pay todays lower tax rates for tax free income in the future Where we can be quite certainbnwe will be paying higher taxes. We
Taxes will remain unchanged this year and maybe for 2009.

Buy a bigger house. Intreest and taxes are deductable.

The Roth makes more sense for future investments, but I don't believe it allows the same tax advantages as the traditional. Traditional 401(k) investments come out pre-tax, effectively lowering your taxable income.
For the first time, my employer is going to offer a Roth 401(k), and I am very much looking forward to getting in on it.

KC5AV wrote:The Roth makes more sense for future investments, but I don't believe it allows the same tax advantages as the traditional. Traditional 401(k) investments come out pre-tax, effectively lowering your taxable income.
For the first time, my employer is going to offer a Roth 401(k), and I am very much looking forward to getting in on it.

My thoughts on the Roth is to pay the taxes now at the present cheaper tax rates.... Later when the post Obama tax rates kick in one can withdraw the funds tax free.

I already maxed out on the Roth IRA for this year.. I will turn 60 during Obamas administration Assuming he increases the taxes I will save on the difference of todays and the futures tax rate.

WarHawk-AVG wrote:Actually 401K's aren't safe anymore
http://www.lazymanandmoney.com/5-reason ... your-401k/" onclick="window.open(this.href);return false;

Do you think taxes will be LOWER on your 401K once 0bama starts doing his thing?

http://www.investorsinsight.com/blogs/f ... 401-k.aspx" onclick="window.open(this.href);return false;

Be afraid..be VERY afraid!

I would think twice about making any contributions to a 401(k) or IRA in 2009. I'm even considering withdrawing the post-tax contributions I made to my Roth IRA in previous years before Obama redistributes it to people who voted for him.

aardwolf wrote:I need to lower my income taxes or I might as well quit my job on January 20th and sign up for the bread and circuses.

I would never suggest working off the books and getting paid under the table, but if you think you can get by without W-2 income, the next four years looks like a great time to give it a try.