Making the Best Mid-Year Tax Moves

Following our plan will help you trim your federal, state and local obligations

company-related classes may be fully deductible and you can use them to offset income on Schedule C. If you filed as an employee — even of your own company — the costs of courses, books and subscriptions would be considered an "employee business expense" and categorized as "miscellaneous itemized deductions." This would include investment expenses and tax preparation, deductible only if they exceed 2% of your adjusted gross income (AGI). That means that if you made $100,000, then you could deduct the amount in excess of $2,000.

Project income and miscellaneous deductions. If you’re certain that you will be over the 2% threshold, shoot the works on classes, books and investment publications in the coming months.

The following are some other savings that the self-employed should look out for:

  • Check up on medical expenses. The same logic applies to medical bills, which are deductible to the extent that they exceed 7.5% of your AGI. "At midyear, if it looks like you’ll be over the 7.5% mark for the year, accelerate optional medical expenses such as checkups, eyeglasses and dental care into 1999 to get the deductions," says Ed Mendlowitz of Mendlowitz Weitsen. "If you think you’ll be short of 7.5% in 1999, try to bunch those expenses in 2000 to get a deduction."

  • Consider the "home sweet home" deduction. If you’re self-employed or run a sideline business out of your abode, make sure you meet the qualifications for home office deductions. Effective this year, you can take the deduction even if you use a space only for administrative purposes — as long as you have no other place where you can run the business.
    "We have a room we use for matters related to our work," says Taneshia Nash Laird. "I may begin my own business and, if I do, I would make sure that this room is not used for anything else, so we can get the home office deduction."
    If you qualify, deduct a proportionate share of such costs as utilities, security monitoring and homeowner’s insurance, as well as direct costs like office furnishings. However, the ded
    uctions can’t exceed the income you receive from your home-based business.

  • "Expense" business equipment. This year, you can write off as much as $19,000 worth of equipment, costs that normally would be depreciated over a period of years. There are some limits to this deduction, though. For one, the $19,000 allowance applies only if you purchase no more than $200,000 worth of equipment in 1999. Above that threshold, you’ll lose the ability to do dollar-for-dollar expensing.
    Also, such deductions can’t exceed your income. Therefore, if Taneshia Laird had no income from her start-up venture in 1999, she wouldn’t be entitled to those deductions. Counters Weitsen, "If she has income from a job, however, she can take this deduction against that income. Moreover, as long as she files a joint return with Roland, they can use his income, too, to support this deduction."
  • Consider buying a car for your
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