Today bloggers all around the world are going to write about nature, conservation, the need for a more sustainable environment. I don’t need to explain to you that this is necessary, because you read and hear the sad news each day. You see things that might make you angry, sad or helpless. But life goes just the way it’s supposed to be, we are always in the situation that we are supposed to be in. There is always something to be learned and an almost immediate solution. Doesn’t mean that when we go for the solution all the done damage will turn itself around in a second, but the way to sustainability is here, it can be instant.
Look at your life… haven’t you felt a turnaround of spirit countless times? Tell me, how fast does your whole world change the moment you change your view from negative to positive? You know that it’s instant! Your energy changes, you feel more alive, problems that seemed like mountains before are now just little stones on the path that leads up the mountain. You just perceived how not to trip over those little stones.
Suddenly life feels different, it smiles at you and positive things happen. Ask yourself; “how different am I now then 10 seconds ago when I was feeling down?” You’re still in the same body (although it feels much lighter), you still own the same things (but suddenly you value them), you still have the same friends and family (but now they seem to count), you are still surrounded by people who might not love you and don’t do exactly what you want (but now you understand and love them and wish you can help them instead) and you still have an unlimited potential.
That is just what it feels like to make a mistake with your taxes. One-minute your life is smiling, the next it is a big piece of cash that has been snatched from your wallet. Do you see how quick life changes?
The biggest tax mistakes you can potentially make at the end of the year
Getting married
The marriage penalty pretty much sucks (but marriage is awesome!) and your filing status for the year is based on your filing status when the year ends, December 31st. It doesn’t matter if you get married 11:59pm on December 31st or 12:01am on January 1st, your filing status is married no matter what. Is the marriage penalty really that bad? Two singles making $70k a year will pay a total of $13,923.75 each in taxes, or $27,847.5 combined. A married couple making $140k a year combined will pay $28,192.50 – $345 more. I don’t know about you but I’d rather put that $345 into my pocket than Uncle Sam’s.
Prepaying Taxes & Other Unallowable Deductions under AMT
The Alternative Minimum Tax is an ugly word lots of people have been throwing around lately and it has the potential of taking a positive tax move and turning it into a hugely negative one. Prepaying certain deductible expenses, such as state/local/property taxes, early allows you to take the deduction earlier – that’s a positive tax move. However, if you are subject to the AMT, you aren’t allowed to take those deductions so you face the double whammy of prepaying your taxes (you lose interest on the money in a bank account) plus you get no benefit for doing so (tax deduction).
First determine if you’re subject to AMT. If you are, don’t prepay these normally deductible expenses (state and local income taxes and property taxes, un-reimbursed business expenses, child-tax credits, tax-preparation fees, legal fees, home-equity loan interest). If you are, then try to prepay them if you can so they can be applied to your 2018 tax bill, instead of your 2019 tax bill.
Don’t Sell Stock – Lower Capital Gains Rates in 2019
If you’re in the 10% or 15% income tax bracket, next year that your long-term capital gains tax will fall to 0%, so wait a few more weeks if you’ve been thinking of pulling the plug on an investment.
Derek Fisher, from the short-term loans lending portal SimplePayday explains;
“Investments can be a game of cat and mouse. Often the one that shows the least fear and can overcome the barriers to entry are those that succeed.
“With investments, selling is a matter of judgement, timing and game-playing. But sometimes you get a bit of information ahead of time, meaning that you can act in a fortuitous manner.”
Defer Compensation If You Can
The following moves all fall under the greater heading of deferring compensation because money you earn in December 2018 is taxed on April 2019. Money earned in January 2019 is taxed in April 2020 – a significant difference for such a short delay.
- 4a. Don’t Take That Bonus (Yet): Bonuses are hot but try to push the payment of that year-end bonus to the new year and you can push the tax bill to next year also.
- 4b. Don’t Take A Capital Gain (Yet): Much like a bonus, don’t take a capital gain near the end of the year when you can push it to next year. The reasoning is the same – you get your cash in a few weeks and you get the tax bill in over twelve months. If you have a loss this year, you can even use that to reduce your income. (plus, you might be seeing lower tax rates)