|
Jan.
3, 2002 - Every
January we make a host of New Year’s resolutions intended to enhance our lives.
But,
as we all know, the reward of self-improvement never seems to incentive enough
to keep our resolve much past the end of the month.
Well, they say money is
the great motivator, and Millian M. Toms has some financial tips that just might
help you to keep some of the most common New Year’s resolutions.
Find a
new job
If you itemize your
deductions on your tax return, you’ll be able to deduct the expenses related to
looking for a new job. These expenses include costs like printing resumes,
postage, mileage to and from interviews and phone calls.
There
is one hitch, though, Millian says. “You have to be looking for a new job in the
same trade or business,” she says. “If you are, then you can deduct all your
related expenses, whether you find a new job or not.”
Since
you need to be looking in the same industry you are currently working, students
just coming out of college don’t get to deduct job search-related expenses
either.
Go back
to school
Going back to
college to earn a higher degree and improve your job skills and marketability is
a common New Year’s resolution. When it comes to deducting education-related
expenses, there are a few things you need to know.
If
you went back to school in 2001, you can deduct certain education expenses only
if you itemize your deductions on your tax return, Millian says.
And
these expenses are only deductible if you go back to school to maintain or
improve a skill that is required by your employer, trade or business.
For
example, if you are a teacher with a bachelor’s degree and you are required to
return to school to teach a different grade or to become an administrator, you
can deduct some of your educational expenses.
What
can you deduct? Basically, you can deduct your tuition fees, the cost of books
and related expenses. Personal and capital expenditures, such as buying a
computer, cannot be deducted, however, even if required.
The
good news in 2002, Millian says, is that you’ll be able to deduct your qualified
educational expenses whether or not you itemize on your tax return.
Start
saving for your retirement
In 2002, you can
set up an IRA and put up to $3,000 into it. “And the sooner you set it up,”
Millian says, “the sooner it will start making money for you.”
Plus,
if you didn’t make any IRA contributions in 2001, you can contribute another
$2,000 to your new retirement account. The new tax laws also have a catch-up
provision which allows you to add another $1,000 to your IRA. You could start
your retirement account with up to $6,000.
Don’t
forget there are two kinds of IRA’s to consider, Millian says.
If
you open a regular IRA account, the money you put in is deductible now, but will
be taxable when you take it out later in life.
“If
you open a Roth IRA, you don’t get to take your contributions as a deduction
now,” Millian says, “but when you pull the money out later, the principal and
interest earnings are tax-free.”
Millian suggests consulting your tax advisor to determine which type of IRA
would be right for you.
Help
with a needy cause
We often resolve to
help others in need. While you can’t deduct the value of your time volunteered,
hour for hour, you can deduct any out-of-pocket expenditures, as well as
mileage.
So if
you drive to the grocery store and buy the ingredients needed to host a soup
kitchen, you can deduct the cost of the food as well as 14 cents per mile for
the distance you traveled to the grocery store and the soup kitchen.
Another option that can help a charitable organization and offset your own tax
liability is to donate stocks.
“Take
a look at your stock holdings and if you have any gains, donate them to a
qualified charity,” Millian suggests. “That way you get to deduct the full value
of the stock.”
Why
not cash the stock out and donate the money directly? You don’t benefit as much,
Millian says. For example, say you bought $500 of stock that increased in value
to $1,000. If you were to cash out the stock and donate the money directly, you
would have to pay a capital gains tax on the $500 gain and you would have less
to donate to the charity.
If
you donated all the stock to a charitable organization, you would get to deduct
the full $1,000 and you wouldn’t have to pay any tax on the gains (increase in
value).
Don’t
procrastinate
Don’t wait until
April 15. File your tax return early. What else is there to say?
Get
organized
“Plan for 2002 and
the future,” Millian says, noting this is always a good time to update your will
and trust documents.
“Don’t just let life happen to you. And get advice from your tax advisor if you
don’t know what to do.”
|
