Yikes! It’s Monday and your taxes are due by midnight!
Federal Tax Practitioner David Selig shares four last-minute tips that could put a little more money in your pocket rather than Uncle Sam’s.
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#1 - Contribute to your 401K or your IRA if you haven’t already. You have until April 15th to do so.
Selig: That’s a great idea. Whether you have a Roth or a traditional, and if you want to get involved in a self-directed IRA, you don’t have to transfer everything. You can do a partial transfer. So you can actually take a portion of your IRA or 401K and invest in real estate or precious metals or whatever you’re so inclined to put your money into. That’s a really important issue. A lot of people overlook. They feel they missed the year and it’s too late. You still have time.
#2 - If you have rental real estate, are you segregating your costs?
Selig: A lot of people mistakenly just depreciate over 27.5 years or 30 years, and they’re leaving a lot of money on the table. In other words, you can depreciate everything inside your building and outside your fixtures, appliances, hot water heaters, and a much shorter window of time. And by not doing so, you’re leaving a lot of money on the table, and you’re depriving yourself of the opportunity to leverage and buy even more real estate. Interestingly enough, you can take residential property and roll that into a self-directed IRA as well. A lot of people are not aware of that as long as you’re not living in it. If it’s a rental property, whether it’s commercial or residential, you can put it in an IRA or a 401 K, and it might be a very good opportunity for you.
#3 - What to know if you started a side gig in 2023
Selig: Pretty much everything you use to generate income is an ordinary and necessary expense under IRA Section 162. Just keep decent records. You’re not being audited. You’re just claiming it. Whether you’re filing a schedule C or not. Keep good records because these are deductible expenses. Whether it’s a cell phone, a post office box. If you’re going to use your vehicle for business purposes, get a little diary and keep track just in case you get audited. A lot of people, they miss an awful lot of expenses. The reality is, every dollar you save is a big earning. Okay, it’s either going to go to your Uncle Sam or to you. So decide in your own favor.
#4 - For people looking for that extension, what do they have to do?
Selig: File before the 15th or on the 15th. Don’t blow the deadline. You’ll get an automatic six months. If you don’t know how to do it yourself, go to a tax return preparer. Tell them you need to file an extension. Give the information and they will do it for you.