How to Invest and Pay Less Taxes
Sep0
When you invest in anything, you will pay taxes in one form or another. If you invest in real estate, then you pay property taxes. If you invest in stocks, then you will likely pay capital gains taxes. In the United States, The Internal Revenue Service or the IRS collects taxes and enforces the internal revenue laws. The IRS is an agency within the US Treasury Department and is responsible for interpretation and application of Federal tax law. If you do not pay your taxes, then the IRS will collect from you all that you owe plus IRS tax penalties and interests. Most people want to pay as little taxes as possible which is why tax planning is so important. There are many free tax tips that you can learn how to keep as much of your hard earned money in your pocket as possible.
Property tax is an ad valorem tax that a homeowoner is required to pay on the value of the home being taxed. Property tax can be defined as “generally, tax imposed by municipalities upon owners of property within their jurisdiction based on the value of such property.” The taxing authority needs an appraisal of the monetary value of the property, and tax is assessed based on that value. Different countries, states, and jurisdictions have different systems for property taxes.
Now that home prices have fallen significantly, the government is providing lots of incentives to attract people to purchase homes or invest in real estate. They hope that new buyers will help revive the economy and help the real estate market. The new home buying tax credit, for instance, gives a new home buyer a maximum of $7,500 tax credit or $8,000 if the home is purchased in 2009. This new tax credit is for either a single taxpayer or a married couple filing a joint return, but only half of that amount for married persons filing separate returns. The full tax credit is available for homes costing $75,000 or more or $80,000 if purchased after Dec. 31, 2008, and before Dec. 1, 2009. The first-time homebuyer credit is a new tax credit included in the recently enacted Housing and Economic Recovery Act of 2008.
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Donating Your Car as an Investment for Tax Reduction
Jun0
Car donation is the practice of giving away no-longer-wanted automobiles or other vehicles to charitable organizations. In the United States, these donations can provide a tax benefit and have become very popular.
In the United States
Some critics have claimed that car donations are essentially a tax shelter. However, non-profit organizations in the US have come to rely increasingly upon the revenue from car donations. This type of donation has become increasingly widespread; in 2000, 733,000 U.S. taxpayers reduced their taxes by $654 million.
Tax considerations
Although advertised as an easy way to dispose of an old car, donors need to fulfill certain post-donation requirements to qualify for the tax deduction, such as obtaining a written acknowledgment of the car’s subsequent sale by the charity, and itemizing tax returns instead of taking the standard deduction.
For vehicles valued at less than $500, the deduction amount comes from the donor’s own estimate of the car’s value, even if the charity receives less money from its sale. Deductions greater than $500 are limited to the proceeds of selling the vehicle, usually at auction. The U.S Internal Revenue Service advises that starting in 2005:
The rules for determining the amount that a donor may deduct for a charitable contribution of a qualified vehicle, including an automobile, with a claimed value of more than $500 changed at the beginning of 2005 as a result of the American Jobs Creation Act of 2004. In general, that Act limits a donor’s deduction to the amount of the gross proceeds from the charity’s sale of the vehicle.
For vehicles valued at over $500, taxpayers are required to attach the charity’s written acknowledgment to their tax return.
Benefit to charities
Many charities run donation programs. Some have their own car lots which sell the donated cars but many have their donations processed through auto auction companies. Many processing companies also collect and sell donated cars and distribute the money to a charity the donor indicates. The processing company typically takes a percentage of the sale value of the car, but these programs allow charities without their own facilities or staff dedicated to fund raising to benefit from vehicle donation programs.
Ideally, donors should also investigate how much money from the sale of the car goes to the auction processor and how much actually benefits the charity’s programs, as opposed to its administrative overhead.
Learn more about online car donations by taking the car donation quiz and playing car donation trivia games via MastersOfTrivia.com.
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