Quote:
Originally posted by NoSoup
I have a question for you, if you don't mind.
I am about to begin making a relatively high income, and have absolutely no tax shelters other than my retirement accounts.
I am 20 years old and live in an apartment. Within the next year, I will probably make 150k-250k, and I am unsure as to what I can write off.
I will be using my personal money for business expenses, as well as my own vehicle, and I believe that I can write that off, but other than purchasing real estate, do you have any suggestions?
Also, to write off utilizing my personal funds for business expenses, how exactly would I go about doing that? Do I keep reciepts? Log the mileage on my car?
Thanks in advance!
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Your business should reimburse you for expenses you're paying. Hit them up first. If not, you file a 2106, unreimbursed business expenses. Car costs and out-of-pocket costs get included on the same form. Keep a log for car milage (if not reimbursed), and try to update it at least monthly. Keep all business receipts.
As for hiding your income, it's tough to complain making $150k a year, especially at 20 years old. Be happy.
On a tax note, you're screwed. Our system is designed to allow house-owning families with kids the largest write-offs, or business owners. So contribute all you can to a 401(k) or other retirement account, save cash for a nice down payment, and buy a house in a year or two. At your income level, you try to hide too much of your income you'll get hit with AMT (alternative minimum tax) eventually, so consult a tax professional.
Personally, I'd save up, find out where I want to live, and buy a house first. You'll be able to write off your property taxes and mortgage interest. Rental homes can be nice, but can also tie up your liquidity which you might need should a problem arise.