Like Tennessee Ernie Ford once did, I paid a visit to the company store the other day. I n search of some Altoids, I stopped by the news rack to get a cursory glance at who Lindsay Lohan is currently dating. Being a finance type, my eye was drawn away from young Lindsay, away from the scores of Michael Jackson trial covers, and toward the magazines with the word "Money" in the title.
In the eight to ten seconds at the news rack, I noticed two financial magazines that offered tax advice. One boasted "25 Ways to Reduce Your Taxes." Not to be outdone, another mag boasted "28 Tax Cutting Tactics." Every year in early March, these magazines rehash the same old articles, focusing on lowering their readers Federal Income Tax burdens.
I've read scores of these articles over the years. They always offer pretty obvious advice, like "Open an IRA." However, they miss several tax saving opportunities that a keen financial mind sees. So as you do your taxes, keep in mind this list of "Nihilist's Top Eleven Ways to Reduce Your Taxes That You Won't Find In a Financial Magazine:"
11. Stick a Fork in Your Eye - I've written about this hidden tax break before. Oedipal blinding can put hundreds of dollars in your pockets this year and every year for the rest of your life. Don't want to go blind? Here's an equally great opportunity: blind your spouse! You'll get the same tax reduction. It might even help you save more money with Tip #10. Whether it's you or your spouse, you could also save money with Tip #9 as a result of this tactic.
10. Get Divorced - Despite President Bush's best efforts, some couples still face a marriage penalty. Even old foes like Nick Coleman
and John Hinderocker
can agree that dumping the first spouse can be an effective way to reduce your burden to Uncle Sam.
9. Get Sick - If medical bills are more than 7.5% of your gross income, your tax burden falls. This includes dental expense as well, so knocking your teeth out can provide an added bonus this April.
8. Get old. Granted, this is something one can't just decide to do, but when you turn 65 your burden falls.
7. Have a child. This is an especially good strategy if you are low income and/or a single parent, as the Earned Income Tax Credit actually pays low income people for this activity.
6. Move to Minnesota. Granted, this may actually increase your overall tax burden, but it will shift it from Federal to State. So if you're the type of person who can't stand the idea of George Bush and his bodies taking your hard-earned money and giving it to rich defense contractors this is a good strategy. That's provided you don't mind it going to Red McCombs in the form of a stadium subsidy.
5. Buy a house that you can't afford. After all, mortgage interest is tax deductible. Not only do you get a dream mansion, but your taxes plummet.
4. Take out an interest-only mortgage. This strategy will help more in future years. As you pay your house off, you lose an important tax deduction. With the interest-only loan you never have to worry about pesky home ownership interfering with your tax opportunity.
3. Invest poorly. While capital gains are taxable, capital losses provide tax savings. People who went long on Enron and Tyco in the late 1990's still are reaping the tax benefits.
2. Donate all your money to charity. If you make the mistake of making a profitable investment don't sell it, give it to a qualified charity. You can double dip on the savings here in the form of no capital gain to report and a charitable deduction.
1. Quit your job. The biggest determiner of Federal Income tax is income. By quitting your job, you will likely eliminate the Feds incentive to take a piece of your pie. A related strategy is to take a lower paying job. Also, if you join the army and go to Iraq, combat pay is tax exempt.
Now these are some great ideas to put the tax code to good use.