Three tax loopholes for the merely middle class by Beth Pinsker
“Hey, the average middle-class earner can’t afford to pay a tax attorney to take advantage of the loopholes in the complex code. Here are three easily accessible tax loopholes to help out. And if you know any others, put them in the comments below.” – GC
(Reuters) – Former presidential candidate Mitt Romney’s legendary tax deduction for his horse may sound like the ultimate boondoggle of the super rich.
Ditto for writing off the private jet, stashing money in offshore accounts and paying the nanny as a corporate employee.
Here are some other tax loopholes that might be within your reach:
1. Maximize your 529
The tax benefits of a 529 college savings plan are baked right into the plan – you put in after-tax money and the proceeds grow tax-free, like a Roth individual retirement account. In some 34 states and the District of Columbia, you also get a tax benefit on your state taxes. But there’s more to it than that.
Depending on the state, each parent can make a contribution for each child. That’s why Patrick Beagle, a financial planner at WealthCrest in Springfield, Virginia, has four accounts for his two children. Beagle and his spouse each contribute the maximum of $4,000 per year for his state’s tax break, for a total of $16,000.
You can also “front-load” your 529 savings by making several years of contributions at once, something President Barack Obama and his wife Michelle were able to take advantage of for their two daughters, putting $240,000 away all at once in 2007.
Depending on the state, there may be no time limit on how long your contribution has to stay in the 529 account before you get a deduction. If you have a child who is already in college, you can make your yearly contribution, get the tax credit and then withdraw it for use immediately.
Read the full article at: Reuters