Vehicle Expense - Should I Take Depreciation and Actual Costs ... or Mileage?

Answer ... it depends!  What are you using the vehicle for?  How many miles are you driving for a tax deductible purpose each year?  How much will your miles driven vary from one year to the next?  How many years do you plan to keep the vehicle? What is the time value of money to you ... specifically how much more valuable is a tax deduction today than a tax deduction 1, 2, or maybe more years in the future?

Your tax software will give you an answer for this year.  If that answer will also work best for you for the remaining years you use the car, you're in good shape.  Otherwise, you will want to visit with your tax pro... one that you have picked that will take the time to explore each of these options with you.  Be sure to remember that whether you choose to take claim depreciation and actual operating costs, or you choose to use the IRS mileage rate, you are required to continue using that choice for as long as you own and operate that vehicle.

Higher Education Expenses and Your Taxes - Which Choice is Best for Me?



Exciting New Build by Caryl Sumner,
picturing Walsall College (U.K.)



If you, your spouse, or your qualifying child attend an eligible post-secondary school, you could be eligible for up to $2,500 per student in tax savings this year.  There are three main options, with complex questionnaires to determine what you qualify for.  Your tax software will guide you through these questions and generally will pick the best option -- but you need a human to see if state tax makes a difference.

The options for 2010 tax returns are the American Opportunity Tax Credit, the Lifetime Learning Credit, and the Tuition and Fees Deduction.  We'll discuss each of them, and also give an example of how state tax can change which choice will save you the most money.

Should I Use Software To Do My Own Taxes Or Get Help From A Pro?

Most people use a computer to prepare their yearly income tax returns now.  The laws just get more and more complicated -- it's VERY difficult to do it any other way now.  The IRS has even stopped mailing the forms booklet now, if you do still want to figure your taxes out by hand, you'll probably have to use a computer anyway so you can go to http://www.irs.gov/  and download and print the blank forms you'll need.  (A few libraries and post offices still have a handful of the forms, and what is left is drying up quickly.)

So your choice has pretty much come down to -- are you going to get the software and do it yourself, or are you going to see a tax professional and have the help of their software? 

Buy or Rent Your Home? Details to Help You Decide

A few of you might remember the 1950s TV quiz show, The $64,000 Question.  In today's dollars, that's closer to the $464,000 question -- and you might be surprised that it's not just for a few select contestants on a television show, but for you and pretty much everyone you know.  So what is this vital question?

The median rent on a home in the United States today is $842 per month.  If inflation averages 3% per year, you will pay well over $1.1 million to rent that home over your lifetime! That's based on renting your first home at age 25 and living 50 more years.  If you live (and rent) longer than that, ... you do the math! 

Or you could buy the home.  If you could pay cash for it, its median price today is $168,800.  But you also have to pay property tax, insurance, repairs and maintenance ... not to mention mortgage interest and possibly private mortgage insurance if you don't happen to have that much cash handy to make the purchase. 

Should I rent my home or buy it?  That is one of the biggest life decisions you will ever make. It's especially hard to make that decision today.

A Hidden Gem-The Savers Credit Could Be Worth $1,000 To You

Yahoo! Finance has a highlight out on an article "Save $1,000 on Your Tax Bill" by Consumerism Commentary, provided by US News and World Report on Wednesday, January 26, 2011:

http://finance.yahoo.com/taxes/article/111947/savei-$1,000-on-you-tax-bill?mod=taxes-advice_strategy

I recommend this article as it does a great job of telling you about the value of this credit, which is designed to give low income taxpayers a powerful incentive to save.  (Low income meaning this credit is gone at an income of $27,750 for singles and $55,500 for married couples filing jointly, and begins to be phased out at lower income levels than those).

But this article points out that you should take a second, serious look at the savers credit.  I'd like to add an exclamation point to a couple of items they discuss.

Top 10 Ways To Go Broke Trying To Build Wealth

10  Buy on impulse what feels good at the time and don't keep records of what you spent your money for.  After all, life is short, you might as well enjoy it!

My response:  You definitely should enjoy life, but are you settling for something good or simply momentarily pleasurable and giving up the better and best of life.  If you don't keep records, you likely will have a nagging feeling that "life is flying by and what do I have to show for it?"  But consider this.  If you do a quick $40 ATM withdrawal twice a week, that's over $4,000 in a year, and over $200,000 in a lifetime that you have no idea where it went.  If that's you, and you can't seem to get your $20,000 in total credit card balances to go down, paying on time 11 months a year but late "only once", then you're paying 29.99% interest -- $6,000 every year just for interest.  No wonder the balance doesn't go down, when it takes $500 every month just to tread water.  Over a lifetime, if you keep that $20,000 balance, you'll pay over $300,000 in interest on those cards.  Hard to build wealth when you do that.  Keep records.  Look at them.  Be surprised with how much you spend on things that are already consumed.  Decide which of those things you'd rather do without ... would you rather make yourself wealthy, or the bank?

How To Get Wealth When You’re Broke And Over 50

Wealth is not everything.  Wealth with selfishness is loneliness. Wealth does happen to be the easiest path to personal freedom … the freedom to have the time and the means to live life the way you choose to do so.  And the best path to wealth, the one any determined person can do, is to become a passionately smiling tortoise:  Have a mentor and a plan, consistently follow your plan step by step, be alert to adapt to changing conditions as your plan unfolds, and keep smiling – enjoy the journey!  It really is that simple … and that complex.

If the Best Path to Wealth is Slow Cooking … Aren’t I Already Too Late?

You’ve probably seen and heard the facts and figures about accumulating wealth over a lifetime. Here’s a couple of examples:  If you save $2,000 from money earned in a summer job at age 16, then do it again at age 17, 18, and 19 … and then never add another dime, but let it slow cook at average long-term stock market returns until age 65, you’ll have over one million dollars!  If you’re too late for that one, you could save $100 per month every month without fail from your paycheck beginning at age 27, again let it slow cook at average long-term stock market returns, and retire at age 67 with over one million dollars. (These examples are both based on average returns of about 11.5% per year).

Here’s a Plan That Will Work in Just 9 Years