While hiring an accountant to do your taxes in your stead help ease the burden, reduces the probability of error and increases the overall efficiency, there are some advantages to being self-preparer, as well. First of all, the cost of hiring a skilled accountant can be a significant expense. Second, you get a much better insight into your own expenses and finances. Also, unless you go with someone who’s 100 percent reliable, you’re exposing yourself to a potentially expensive and dangerous fraud (even identity theft). With that in mind, it’s not that hard to understand why so many people decide to do all of this on their own. Here are several tips worth considering for all those who are on this path.
Work-related deductions make a difference
One of the biggest tax savings can be made from work-related deductions. Nonetheless, a lot of self-preparers aren’t exactly sure what qualifies as a work-related expense. Using your home computer, your internet, your home office or your phone for work purposes is a work-related expense, some of which you might be able to deduct. Still, there are several other criteria that an expense has to fulfil in order to be eligible for deduction. First, you have to be the one who spent the money. Second, it must not have been already reimbursed. Third, it needs to be directly related to your income. Finally, you must have a record to prove it.
Another thing that people often forget to consider is the cost of self-education that comes as an effort to retain or improve their current professional status. We’re not just talking about the course fee but also about textbooks, stationery and fees for devices such as computers or tablets used for this purpose. However, keep in mind that loan program repayments aren’t deductibles, which is a mistake that a lot of self-preparers tend to make.
The assets that you own may lose value over the course of time, however, the depreciation rate depends on the value of the asset, the period of time it’s been used for and its effective life. This latter is the extent to which it can be used for income-making purposes during its estimated life. Keep in mind, however, that even if you aim to tackle all of this on your own, you still might want to entrust an estimate to a specialized tax advisor. Efficient surveyors can allow you to get the maximum deduction and help you avoid the need to settle for less due to bad deals that come from low-quality reports.
Rental property deductions
Owners of rental properties have even more to consider, due to the fact that everything from land tax to interest on investment loans can become a claim for immediate deduction. Other than this, common maintenance tasks and expenses like the cost of repair and maintenance, gardening and pest control, as well as insurance also fall under this category. Finally, even the cost of finding a suitable tenant, in form of agent’s commission and advertising may end up being an eligible expense.
Lastly, if you had any investments in the previous year and they’ve been generating income, you need to consider the fact that this too needs to be included in your tax report. Fortunately, there are numerous online tools specialized in calculating projected taxes on investment income. This is quite handy, seeing as how bond income, stock dividends and capital gains provide returns that are treated differently. Fortunately, with this kind of tool, you can automate this estimate in a simpler and more expedient manner.
In the end, however, it’s important that you’re realistic about your abilities to handle all of this on your own. You see, if you have a simple return form, there really might be no reason for you to go to a professional. Also, if you feel like you have enough time to prepare it all on your own and keep up with all the relevant regulations, then so be it. Nevertheless, you need to see your time and effort as a resource, which might help you realize that hiring a professional might be a more frugal choice.