Accounting & Bookkeeping & Small Business Forum

[ivydl]

My 2 children are both over 17, now and I would like to "find" more federal tax deductions. I work full time and my wife is a homemaker.

We have land outside of the city, and someone suggested that we put in a small chicken yard and claim a farm deduction.

Is this even possible?

[Ken]

The best form of deductions is to start a business. Even a multi-level vitamin business is better than nothing.

[RobJ]

ivydl wrote: We have land outside of the city, and someone suggested that we put in a small chicken yard and claim a farm deduction. Is this even possible?
Don't know, but if someone says "yes", get several more opinions. It's amazing how many opinions you can get to one question, but remember you'll be standing alone if you get audited.

[dp1903]

Any type of "farm" would need to be operated FOR PROFIT. If you're thinking of putting up a pen and buying chickens to sell for profit, think of the amount of time needed to feed them and keep track of expenses. The Regs say you need to make a profit in the business at least 3 out of the first 5 or 4 out of the first 7 years, depending on what type of business you have, or the IRS might consider your operation a "hobby" and disallow any expenses in excess of revenue.

What about contributing to a traditional IRA for yourself and wife or do you have a 401(k) program that you haven't maxed out?

If any of your children go to college which you pay tuition for, the first 2 years of tuition will qualify for the Hope Education Credit, assuming your income isn't too high. The Credit is 100% of the first $1200 of tuition and 50% of the next $1200 for a maximum credit per child of $1800.

Are you eligible to setup a Health Savings Account with or without your employer's medical insurance? The money can be placed into it pretax (not taxed on it for income tax purposes) and can be rolled forward to the next year if not used in the present year. It can only be used to pay medical expenses.

Looks like the residential energy tax credit expired at the end of 2007? Anyone know if that is so? That allowed a credit against tax, dollar for dollar, for storm windows, insulation, efficient A/C and heating units, and water heaters.

Tax on "qualified dividends" is either 0% or 5% this year, depending on income.

That's all I can think of at the moment.

[trarob]

Charitable contributions-make sure you get a year end statement to support what you have given

Maximize your 401K contributions to lower your taxable income

Have your wife start a home business. Mary Kay, Avon or even a small day care or become a home school teacher for others.

[irsfixer]

trarob wrote: Charitable contributions-make sure you get a year end statement to support what you have given

Maximize your 401K contributions to lower your taxable income

Have your wife start a home business. Mary Kay, Avon or even a small day care or become a home school teacher for others.

The advice to start a business in order to reduce taxes is almost always a bad idea. The only way you save on taxes is if the business has losses and losses cannot be sustained very long without a challenge to the profit motive of the business. If the motive is to reduce taxes then it fails the basic test.

I am not discouraging anyone from starting a business and getting the maximum benefits from it. But understand, if you operate it as it needs to be operated in order to justify losses, the end result should be a profit, which will increase in your taxes.

The Mary Kay/Avon idea is particulary abusive since virtually all of them I have seen in 25 years of practice lost money every year. The owners thought they could just buy product for persoanl use and for friends and relatives and deduct mileage, product for "samples", home office etc. They are a sham if operated this way.

If you start a business - do it for the right reason - to make millions and retire early. If it is to save on taxes - you have a loser from the start.

[Richard Noot]

ivydl wrote: My 2 children are both over 17, now and I would like to "find" more federal tax deductions. I work full time and my wife is a homemaker.

We have land outside of the city, and someone suggested that we put in a small chicken yard and claim a farm deduction.

Is this even possible? Your increase in taxes is only $200.00 to $560.00 at the most. I would not look for deductions but credits instead.

[Richard Noot]

irsfixer wrote: trarob wrote: Charitable contributions-make sure you get a year end statement to support what you have given

Maximize your 401K contributions to lower your taxable income

Have your wife start a home business. Mary Kay, Avon or even a small day care or become a home school teacher for others.

The advice to start a business in order to reduce taxes is almost always a bad idea. The only way you save on taxes is if the business has losses and losses cannot be sustained very long without a challenge to the profit motive of the business. If the motive is to reduce taxes then it fails the basic test.

I am not discouraging anyone from starting a business and getting the maximum benefits from it. But understand, if you operate it as it needs to be operated in order to justify losses, the end result should be a profit, which will increase in your taxes.

The Mary Kay/Avon idea is particulary abusive since virtually all of them I have seen in 25 years of practice lost money every year. The owners thought they could just buy product for persoanl use and for friends and relatives and deduct mileage, product for "samples", home office etc. They are a sham if operated this way.

If you start a business - do it for the right reason - to make millions and retire early. If it is to save on taxes - you have a loser from the start. AMEN