Caesar or Ceaser?

[DJ Minteer]

We pretty much give it all to Caesar (the government) don’t we? Or at least until April or May or beyond each year. So…be a ceaser instead! We’re not saying to quit paying taxes. Just quit paying more than you have to.

Here’s a trick that we wish we learned years ago because it could have saved us a bundle on taxes. It’s funny – in all the books we’ve read we never saw any mention of this one. Yet it was our off-the-shelf tax filing program that contained some “tax tips” for future tax returns that mentioned it. So we got thinking, hmm…

If you give money to charities or other causes that are tax deductible and/or have other deductions (such as mortgage interest, property tax, other taxes) that are sufficient enough to push you from taking a standard deduction on your tax return to itemizing these things, then listen up. Here’s what you can do.

After you have given/paid these tax deductible things throughout the year, if you have the extra cash give/pay next year’s items too in December. That way when you file your taxes you’ll have a whole heap more tax deductible items.

Then the following year, take the standard deduction. Since you will have given/paid most or all of that year’s items the previous December, it’s likely that the standard deduction will be by far greater than whatever tax deductible items are left for that year.

Get it? You itemize one year and take the standard deduction the next. Then itemize the next, standard deduction the next and so on. The years you itemize you always do two years’ worth of deductible giving, interest, and taxes if you can.

But do the math first. Plan it all out to determine just what the savings will be. Yes, it will require some not-so-fun digging through you tax records. But you really could save thousands for your efforts. Once you figure it out the first time and have a plan, it will be relatively easy after that.

Just think of the possibilities of not giving it all to the government. Maybe some causes near and dear to your heart can benefit instead.

[clydewolf]

DJ Minteer,

Yes, that is a good strategy that has been around for a long time, and worthy of a reminder.

Here is another, that only folks with IRAs, 401ks 403bs etc, aged 70.5 or older can use.
If you do not fit this category, TELL SOMEONE that does fit.

You must take an RMD from your IRA. Use the Qualified Charitable Distribution (QCD) method.
This counts toward your RMD amount. You can give up to $100,000 a year via the QCD.
The money does not show in your taxable column of your 1040, so you do not pay income tax on the amount of the QCD.
And you do not get to take a Schedule A Deduction either.

The QCD amount Will Not be used to determine the taxable amount of your Social Security Benefit.

This feature is available up to December 31, 2011. After that it is gone unless Congress makes an extension.

But if you do a QCD in 2011, it will help to lower your RMD for 2012.

Here is more information about the QCD, see page 39: http://www.irs.gov/pub/irs-pdf/p590.pdf

Ask your IRA administrator for guidance.