Have you looked at your income and expenses for 2022 to see whether you need more income tax deductions before the year ends?
Now is the time to take a look, because our current income tax rates can take a considerable bite out of your bank account. Go here to check the percentages for your filing status and your income.
Spend now to save on April 15.
If your income is right on the edge of a tax bracket, spending a few hundred dollars this month could save you a few thousand. Otherwise it will simply reduce the cost of whatever you need right now.
If your tax rate is 24%, an extra $1,000 in deductions will save you $240 at tax time. So of course, only spend the money if you need and will use the product or service you’re buying.
Review what you’ve spent to see if you’ve missed income tax deductions.
Yes, this can wait until the new year, but put it on your to do list and don’t forget! Five dollars here and ten dollars there, not to mention a hundred or two here and there, can really add up, so review your expenditures.
If you use a program like Quicken, review every category to make sure that every deductible expense is entered in the right place. If you use Amazon and order both deductible and non-deductible items at the same time, be sure to check that you’ve separated those purchases.
And, if you’re like a good friend of mine who throws all of his receipts into a shoebox to sort later – be sure to get it done! Receipts for cash purchases count too, as long as you have the receipt.
What counts for real estate business income tax deductions?
Equipment and supplies you use in business:
Think of electronics, your desk chair, printer paper, thank you notes, greeting cards you send to clients, signs, fliers, business cards, etc. Take a look around your desk. Have you deducted the cost of everything there that you use in business?
If you need electronics or other equipment, the good news is that what you want just might be on sale right now. Check and see! And, considering the current rate of inflation, even if what you need isn’t on sale, you might pay far less now than you will if you wait a few months.
Don’t forget the prospecting letters you use to attract new clients, nurture new leads, and stay in touch with your all-important sphere of influence and past clients. If you need to stock up for 2023, be sure to go here to get the appropriate discount code.
Services – people who help you:
Your web designer, graphic designer, copywriter, office assistant, virtual assistant, researcher, printer, photographer, sign installer, etc.
Check this website to learn which expenses count for income tax deductions.
Client gifts can be income tax deductions:
You can take an income tax deduction of up to $25 per person per year, plus the cost of postage, engraving, or gift-wrapping.
Meals and snacks with clients:
This one is a bit complicated. Go here to learn more.
Hopefully you’ve kept good track of your mileage all year so you can qualify for deductions. If not, start on January 1 so you’ll be set for 2023. Learn more here. https://turbotax.intuit.com/tax-tips/small-business-taxes/business-use-of-vehicles/L6hi0zzzh
Note: Child care qualifies for tax credits rather than income tax deductions.
If you wait to make your purchases until January, you’ll (hopefully) get income tax deductions for 2023.
However, do consider the time value of money. What you save now might pay a bill that would otherwise accrue interest. Or, you might use it for an investment that would grow over the next year.
And of course, we never know how the tax code might change before next year.