How Pocket Tax Deductions Can Save You Money
There's an old saying: It's not what you make, it's what you keep. With the ever increasing cost of living and no congressional tax reforms in sight, what can you do? Take every possible deduction from your taxable income.
Reducing your taxable income is a great way to keep more of your hard earned money.
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Brenda the Consultant
Brenda is computer consultant working in the Philadelphia metropolitan area. Her Sole Owner business has grossed $90,000 in 2007. Brenda uses her personal automobile for her business and takes the standard IRS mileage rate deduction on all business use of her vehicle. Brenda uses her lunch breaks to network with potential new customers on a regular basis. She makes sure that she sits down with at least two prospects a week for lunch to ask for referrals or contract work.
Annual automobile mileage for business use 8,500 ( @ 48.5c /mile ) = $ 4123
Meals: 50 weeks @ 2 lunches per week @ average $25 per lunch (50%) = 1250
Total business deductions: $ 5373
Brenday taxable rate is 41% for federal, state, and Social Security. Brenda's $5373
deduction will save her just over two thousand dollars.
John the Real Estate Investor
John is a real estate investor who runs a small property management / investment company from his home office. John uses his personal vehicle for viewing potential investment properties, checking on rental units and meeting with realtors. John frequently plays golf with potential real estate investors whom are doctors in his local community.
Annual automobile mileage for business use: 12,300 ( @ 48.5 c/mile) = $ 5966
Entertainment: 10 golf outings at a local country club (50%) = 1400
Meals with realtors & investors (50%) = 800
Total business deductions: $ 8166
John's taxable rate at 54%. John's $8166 deduction will save him over four thousand dollars.