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[Leverage]

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Couple of links you might find interesting if you don’t enjoy giving money to the government. But if you think big brother manages your money well, don’t bother with the links….

Big Deductions include:

• home loan interest (another obvious reason to buy a home if possible),
• Student loan interest (2,500)
• Get an HSA if you have any health care costs…NSAIDs included
• Moving Expenses for residency or real job
• IRAs

Giving a charitable donation of few thousand bucks may actually save you money when you are on the cusp of a tax bracket…

For the really savvy, I hear starting a business may be the best tax shelter of all. Your business just needs to show motive to profit….





http://medicaleconomics.modernmedic...Article/detail/486585?contextCategoryId=44323

http://www.acponline.org/clinical_information/journals_publications/acp_internist/march04/tax.htm

 

[nociceptor]

Couple of links you might find interesting if you don’t enjoy giving money to the government. But if you think big brother manages your money well, don’t bother with the links….

Big Deductions include:

• home loan interest (another obvious reason to buy a home if possible),
• Student loan interest (2,500)
• Get an HSA if you have any health care costs…NSAIDs included
• Moving Expenses for residency or real job
• IRAs

Giving a charitable donation of few thousand bucks may actually save you money when you are on the cusp of a tax bracket…

For the really savvy, I hear starting a business may be the best tax shelter of all. Your business just needs to show motive to profit….





http://medicaleconomics.modernmedic...Article/detail/486585?contextCategoryId=44323

http://www.acponline.org/clinical_information/journals_publications/acp_internist/march04/tax.htm

Getting taxes out of resident is like getting blood from a turnip

 

[Dinkyconductor]

"Giving a charitable donation of few thousand bucks may actually save you money when you are on the cusp of a tax bracket… "

Um, how?

You are only paying a given percent for the portion of your income above a certain level, for instance,
25% of the amount between $63,700 - 128,500
28% of the amount between $128,500 - 195,850

...so if you make $128,505 your entire income doesn't suddenly get taxed at 28%, only the $5 over $128500 does.

Thus, as far as I know, you can never save money in total by giving a charitable donation, unless I'm missing something.

 

[jwk]

"Giving a charitable donation of few thousand bucks may actually save you money when you are on the cusp of a tax bracket… "

Um, how?

You are only paying a given percent for the portion of your income above a certain level, for instance,
25% of the amount between $63,700 - 128,500
28% of the amount between $128,500 - 195,850

...so if you make $128,505 your entire income doesn't suddenly get taxed at 28%, only the $5 over $128500 does.

Thus, as far as I know, you can never save money in total by giving a charitable donation, unless I'm missing something.

I think it's quite possible that the OP has never actually paid taxes before. 😉

 

[Broken Ankles]

"Giving a charitable donation of few thousand bucks may actually save you money when you are on the cusp of a tax bracket… "

Um, how?

You are only paying a given percent for the portion of your income above a certain level, for instance,
25% of the amount between $63,700 - 128,500
28% of the amount between $128,500 - 195,850

...so if you make $128,505 your entire income doesn't suddenly get taxed at 28%, only the $5 over $128500 does.

Thus, as far as I know, you can never save money in total by giving a charitable donation, unless I'm missing something.

check out http://www.irs.gov/formspubs/article/0,,id=164272,00.html for computing taxes for 2007. For single filers who make $349,701, they will pay about $60,000 more in taxes than those who make $349,700. Giving that dollar to charity will save you almost $60,000. i'm not a tax expert, but i think this is what the OP meant.

 

[soupcan]

Someone who makes $349,701 pays $0.35 more in tax than someone who makes $349,700 and $0.68 more than someone who makes $349,699.They all pay about $62,000 more in taxes than someone making $160,850. In your link, you forgot the part about additional income over $160,850 being taxed at 33%.

Regards,

Soup

 

[jwk]

Someone who makes $349,701 pays $0.35 more in tax than someone who makes $349,700 and $0.68 more than someone who makes $349,699.They all pay about $62,000 more in taxes than someone making $160,850. In your link, you forgot the part about additional income over $160,850 being taxed at 33%.

Regards,

Soup

Finally - someone who HAS actually paid taxes.

 

[TIVA]

I never understood why people consider buying a home with a mortgage as a tax-saving manuever.

It's like giving someone a dollar, getting $0.35 back, and going, "whoo hooo! I just made out like a bandit!"

Unless of course I'm missing something here ...

 

[jwk]

I never understood why people consider buying a home with a mortgage as a tax-saving manuever.

It's like giving someone a dollar, getting $0.35 back, and going, "whoo hooo! I just made out like a bandit!"

Unless of course I'm missing something here ...

What you're missing is that you're getting something for your dollar. Pay rent and you have nothing to deduct - make a mortgage payment and at least you can deduct part of it. In some areas, mortgage payments are no more than rent, so from a tax standpoint, it can make good sense.

 

[Dinkyconductor]

"I never understood why people consider buying a home with a mortgage as a tax-saving manuever.

It's like giving someone a dollar, getting $0.35 back, and going, "whoo hooo! I just made out like a bandit!"

Unless of course I'm missing something here ..."

Yeah, that's exactly what I always thought, until I bought a place and did the math...

With rent, all of the payment is essentially being thrown away. With a mortgage, the amount being thrown away is as follows:

condo fee and/or maintenance costs + (interest on mortgage + property tax) * (1-(your top income tax rate + state/city tax rate, depending on state/city))

The portion of your mortgage going toward the principal isn't being thrown away at all, you're really just buying your own home from yourself, i.e. all that money will be given back to you when you eventually sell it.

Although overall my monthly payment is higher with the mortgage, take away the principal and 41.5% of the interest and property tax, and my payment was reduced by at least a third.

Another very important thing is that rent will probably increase quite a bit over time, while your mortgage payment won't. Figure in inflation, and your mortgage payment is essentially going down each year, while your rent would be going up (probably).

Plus, your house will most likely appreciate over time, which also helps.

Again, correct me if I'm wrong.

 

[urge]

"I never understood why people consider buying a home with a mortgage as a tax-saving manuever.

It's like giving someone a dollar, getting $0.35 back, and going, "whoo hooo! I just made out like a bandit!"

Unless of course I'm missing something here ..."

Yeah, that's exactly what I always thought, until I bought a place and did the math...

With rent, all of the payment is essentially being thrown away. With a mortgage, the amount being thrown away is as follows:

condo fee and/or maintenance costs + (interest on mortgage + property tax) * (1-(your top income tax rate + state/city tax rate, depending on state/city))

The portion of your mortgage going toward the principal isn't being thrown away at all, you're really just buying your own home from yourself, i.e. all that money will be given back to you when you eventually sell it.

Although overall my monthly payment is higher with the mortgage, take away the principal and 41.5% of the interest and property tax, and my payment was reduced by at least a third.

Another very important thing is that rent will probably increase quite a bit over time, while your mortgage payment won't. Figure in inflation, and your mortgage payment is essentially going down each year, while your rent would be going up (probably).

Plus, your house will most likely appreciate over time, which also helps.

Again, correct me if I'm wrong.

Over the long term ~ 11 yrs buying is better than renting. When you buy you better be sure that you will be in that house for many many years otherwise you'll be better renting. Buying a starter home and then moving to a bigger one is not very wise. You have to factor in all the repairs needed over time and the property taxes paid. There is a good calculator at http://studiobridger.com/blog/?p=18 where you can dial in many market varables and see what is best for you.

 

[Tenesma]

while mortgages are tax-deductible it is a misnomer ---- it is the interest that is tax-deductible...

and renting is still frequently better than buying because we forget several things
1) renting is cheaper per square foot than purchasing that same square foot
2) renting doesn't include property tax
3) renting doesn't include firestation tax
4) renting doesn't include fixing the roof, fixing the A/C, etc...
5) renting doesn't include the condo fees
6) renting doesn't include the homeowners insurance

also rarely is a home an investment that you can liquidate in a few minutes

one of my buddies make 3 million/yr as a mutual fund manager - he rents (he lives in a metropolitan area)... the difference between purchasing and renting he just invests and gets far higher returns in a liquid fashion--- and he can move anytime without the hassles/costs of owning a home...

so financially owning a home ONLY makes sense if you are living in the middle of nowhere without a rental market...

it is not a tax vehicle (despite what people tell you)... and it ain't an investment...

 

[Precedex]

Pay rent and you have nothing to deduct - make a mortgage payment and at least you can deduct part of it.

In Massachusetts, you can deduct rent (up to $3000 - albeit, it doesn't go too far). Check with your individual states.

 

[Monty Python]

The two biggest red flags to the IRS, sure to draw their extra scrutiny.

1. Itemized deductions (bottom line of schedule A) exceeding 35% of adjusted gross income.

2. Taking the home office deduction. This particular deduction garners "special" interest from the IRS. Bully for you if you have airtight supporting documentation, but you still might have to prove your case via an audit.

To maximize your tax-deferred retirement deductions, try to find a job (even if just a moonlight position) which considers you an independent contractor versus an employee. The acid test for this is receiving a 1099, not a W-2.

Independent contractors have much higher limits on what they can put aside in tax-lowering (and tax-deferred) retirement accounts, and also have IRA options which are not available to employees (such as SEP and SIMPLE IRAs). In addition, any job-related expense as an independent contractor is fully deductible (on schedule C). Employees can only deduct their work-related expenses after suffering through the 2% reduction formula.

 

[Bertelman]

Correct me if I am wrong here, (I'm sure I didn't need to say that) but residency does not qualify for relocation deductions. It's not a RELOCATION per se, because you weren't working to begin with.

I think that deduction only works if you are moving from one job to the next.

As for the house, don't be so quick to discount the benefits of ownership. I bought for med school, and the four-year return on my investment most likely brought all costs, including repairs, closing costs, and broker commission easily below what I would have paid for an apartment or house rental for 4 years. More importantly, my neighbors never woke me up, I hung a hammock in my backyard, and no one ever parked in my favorite garage spot.

 

[jwk]

In Massachusetts, you can deduct rent (up to $3000 - albeit, it doesn't go too far). Check with your individual states.

I would guess you can deduct it on Massachusetts state income taxes only - it's not deductible on federal taxes unless you get a 1098 from a mortgage lender or bank.

 

[Monty Python]

Correct me if I am wrong here, (I'm sure I didn't need to say that) but residency does not qualify for relocation deductions. If you receive a W-2 for residency compensation, the IRS considers it income for services rendered = working

It's not a RELOCATION per se, because you weren't working to begin with.

I think that deduction only works if you are moving from one job to the next.

see http://www.irs.gov/taxtopics/tc455.html

.

.

 

[Bertelman]

Just realized my ignorant post. Don't know what I was thinking. Shouldn't be posting on a call night.

Of course you can deduct moving expenses. I just did it on the return I submitted 2 days ago.

In my mind, I was thinking about deducting job search expenses, as in interview trips. That can't be done in our situation.

 

[Monty Python]

In my mind, I was thinking about deducting job search expenses, as in interview trips. That can't be done in our situation.

http://www.irs.gov/pub/irs-pdf/p529.pdf

http://www.quicken.com/cms/viewers/article/taxes/51186



.

 

[Bertelman]

http://www.irs.gov/pub/irs-pdf/p529.pdf

http://www.quicken.com/cms/viewers/article/taxes/51186



.

Not exactly sure what your post is saying here. I read 529 before I posted.

"You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job".

- As a med student, I wasn't in an occupation. I was a student

"You cannot deduct these expenses if you are looking for a job in a new occupation"

- I've never been a physician before, so this sounds like a new occupation

"...or if there was a substantial break between the ending of your last job and your looking for a new one"

- I'd say 4 years is a substantial break


If someone has interpreted 529 to allow themselves deduction of interview expenses, I'd love to know how. I'll amend my tax return.

 

[Monty Python]

Not exactly sure what your post is saying here. I read 529 before I posted.

.

No unspoken message; merely posting the IRS rules for those interested in further reading.

 

[Bertelman]

No unspoken message; merely posting the IRS rules for those interested in further reading.

Very well, then.

 

[bubalus]

One could argue that if you're looking for internship and residency, you're looking for your second job as well as your first.......

 

[mmag]

This is how I am planning to defend my deducting interview expenses for non-prelim interviews should it ever come up.

One could argue that if you're looking for internship and residency, you're looking for your second job as well as your first.......

 

[mmag]

I didn't end up itemizing this year so the interview expenses thing was moot. However I come across this gem of a tax credit that could apply to interns.

The Savers Tax Credit
http://www.investopedia.com/articles/retirement/04/031704.asp

I funded a Roth with just enough money to get all of my federal taxes back and essentially got a 10% return. For the spring semester of 2008 I was considered a part time student as I had front loaded my m4 year.

 

[nlax30]

I didn't end up itemizing this year so the interview expenses thing was moot. However I come across this gem of a tax credit that could apply to interns.

The Savers Tax Credit
http://www.investopedia.com/articles/retirement/04/031704.asp

I funded a Roth with just enough money to get all of my federal taxes back and essentially got a 10% return. For the spring semester of 2008 I was considered a part time student as I had front loaded my m4 year.

Just did our taxes here (wife and I) and saw the "Savers Credit" on there. Looks like we qualified (wasn't a big credit), but only because I had no income.

I guess it would be useful for those interns/residents who are married and filing jointly with an AGI less than ~ $53,000 (for '08), but that would pretty much mean the spouse isn't working. Or if filing single your AGI would had to have been under $26,500..... which would pretty much not include residents/interns.... right?

How did you essentially get a 10% return? Children/EITC?

 

[2win]

Still - don't forget the AMT.... As an attending you cannot save a lot.

 

[mmag]

For tax year 2008, I only worked for 6 months out of the year as an intern which allowed me to qualify for 10% credit on my Roth contribution based on my AGI. If you were married and only had one income you could qualify even working a full year as a resident.

Income Brackets
Credit Married Joint           Head of Household           Single
50% 	Up to $32,000   	    Up to $24,000 	    Up to $16,000
20% 	$32,001 – $34,500 	$24,001 – $25,875 	$16,001 – $17,250
10% 	$34,501 – $53,000 	$25,876 – $39,750 	$17,251 – $26,500
0% 	$53,001+         	$39,751+ 	               $26,501+

Just did our taxes here (wife and I) and saw the "Savers Credit" on there. Looks like we qualified (wasn't a big credit), but only because I had no income.

I guess it would be useful for those interns/residents who are married and filing jointly with an AGI less than ~ $53,000 (for '08), but that would pretty much mean the spouse isn't working. Or if filing single your AGI would had to have been under $26,500..... which would pretty much not include residents/interns.... right?

How did you essentially get a 10% return? Children/EITC?