Here are some simple ways for reducing your tax bill:
- Open an IRA if you haven't already. If the purpose for opening one is war tax resistance, you want to open a simple IRA rather than a Roth IRA because a simple IRA allows you to deduct up to $5,000 per year and $6,000 if you are 50 but less than 70 1/2. Since IRA contributions are deducted from gross income in computing Adjusted Gross Income (AGI), contributing to an IRA can help lower the thresholds needed to make your eligible to deduct medical expenses.
- If you are covered by a retirement plan at work, you can still contribute to an IRA if your income is below a certain limit. The limits are:
- Less than $56,000 for a single individual. If you earn more than that, the deductions are phased out. If you earn more than $66,000, no tax deductions are allowed.
- Less than $89,000 for married couples filing jointly. Deductions are phased out over that limit. Couples earning more than $109,000 may not deduct their IRA contributions.
- Be sure to avoid IRAs that invest in defense contractors. I like Pax World. They don't invest in military industries and endeavor to invest in companies that are environmentally conscious and sensitive to women and Third World countries.
- Here is a website that will help you research socially responsible investment companies: Invest Responsibly
- If you contribute regularly to a religious institution or charity, contribute as much as possible before the end of this year. Charities of all kinds prefer to receive contributions in lump sums because it reduces the handling fees charged by banks.
- If you think that your medical bills will be more than 7.5% of your adjusted gross income (See this page for definitions) you might want to pay for next year's services by the end of this year. For example, many people have regular bills for orthodontists, chiropractors, or acupuncturists. If you pay by December 31, you can deduct them from this year's taxes and your medical practitioners will no doubt be happy.
- . If you have a high-deductible insurance policy, open a health savings account. You can contribute the amount of your annual deductible. Best of all, if you withdraw from the account for medical expenses, the money is never taxes. Many banks offer health savings accounts.
- As mentioned in an earlier post, get a tax credit by registering and paying for college courses now, even if they begin by March of next year.
These are just some basic ideas to get you started. Keep your money for yourself--your retirement, your medical needs, and for religious institutions and charities that give you a sense of community. It is much better than sending the money to Uncle Sam to use for blowing up civilians and indefinitely detaining, without trial, individuals who may be innocent.
