Angry About Taxes? Here’s Help …
Regardless of who you were pulling for in the most recent election, you’re probably not pleased with the amount of money you pay in taxes. Income taxes, property taxes, sales taxes, franchise taxes - and for what? Sure, taxes help build infrastructure, provide safety nets and arm the military, but they also pay for many things that we may personally not agree with, like two trillion dollar bailouts to companies who seem unwilling to stop their spendin’ ways.
Most of us will enjoy a tax break if Obama is able to follow through on his plans to cut taxes for everyone who makes under $250,000 but why wait? Why put control of your tax dollars in the hands of any politician when you have a very simple tax cut strategy at your fingertips that can save you thousands of dollars every year?
Curious?
It’s really so simple, it’s delicious.
The best way to cut your taxes is to spend less money.
Yup, it’s that easy. Think about it.
If you drop your cable, not only do you drop the fee for the service, you drop all of the other little fees and taxes they sneak into your bill - even dropping to a less expensive plan can help. Similarly, you could decide whether or not you need a land line if you primarily use your cell phone (we still choose to have one in our home mostly because I want the 911 service, but it’s probably something we should revisit) and drop taxes on that bill as well. Turn down the heater, don’t leave lights on, lower the temperature on your water heater to 120 so that you can drop your your electricity and gas bill and cut utility taxes. Carpool and/or plan your driving trips to conserve gas, a highly taxed product. Try to stop smoking.
Think about sales taxes! In my town, the sales tax is a whopping 8.3%. That means if I went out and bought a big flat screen TV for $2,000, I would pay $166 in sales taxes. If I don’t buy the TV, I don’t pay the taxes.
Plan ahead for your pre-tax deductions. If you use daycare or have medical expenses, have those taken from your paycheck right off the bat so you don’t have to deal with going through all of your receipts at tax time to take the deductions. It’s still a hassle to file claims, but at least you keep up with it throughout the year if you do it that way - and if you have to pay out of pocket and get reimbursed, you could try taking those payments and putting them directly into savings instead of spending them on goods or services that are taxed!
Pay particular attention to your retirement contributions, which we all know is a way to reduce your taxable income (except in the case of Roch contributions), right? Grow to know and love the IRS website, which has plenty of information on how much you can contribute, including whether or not you can contribute as a “catch up” if you are one of our valued older citizens.
And speaking of deductions, maximize them. If you need to punch through a tax bracket, consider taking a break from offering items on Freecycle and channel those used items to charities instead. If you’ve never used income tax software, consider trying out Turbo Tax - it asks all kinds of questions that may prompt you to remember a forgotten expenditure or just let you know about a deduction you didn’t even know existed.
Barter - although barter is technically taxable, the kind of barter I’m talking about is really just about being in your community. A person who owns a nail salon can be taxed for offering manicures in return for a mural painting in the salon, but if you have a friend who is very good at doing nails and you’re good at hair trims, why not trade those services? Babysitting co-ops are common so that stay at home parents can run errands without kids, and you know how when your zucchini plants go crazy and you give some to neighbors, who in turn bring you a few tomatoes from their garden? That’s barter.
The bottom line is that you do not have some patriotic duty to pay some arbitrary bit into the tax pool, and nor are you powerless against either the evil socialist Democrats or the fiscally conservative in-name-only Republicans of the last eight years. Allow your frugal self to be your tax protesting self at the same time.
This entry is included in this week’s Carnival of Personal Finance - be sure to check out more great posts here!
