How Empty Nesters Can Go About Saving Tax
When you have a family, there is a certain expectation that your children will be your biggest source of strength that will never leave you and go. However, they might not due to education or work abroad or for family reasons. As a result, the burden of paying tax comes on the parents itself who are called as “empty nesters.” Here are many of those options for empty nesters to save tax.
Avoid purchasing a tax bill
Should you happen to invest in a mutual fund at the end of the year, you must check whether the fund will distribute dividends.
Tax-free rental income: your biggest asset
You may not be a landlord by designation, but if you happen to live in an area that has facilities that attracts crowds for, say, entertainment, sports, and other event purposes, you could rent out your house or a part of it on a temporary basis.
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Think of buying a second home
You will get some help from the IRS, should you be planning to buy your second home. Mortgage interest to be paid because of a loan is deductible, which is similar to the mortgage on your main residence. Second home debt can be deducted after an interest of $1.1 million. Property taxes can then be waived off much easier.
Should you have made your office at home itself, then you can deduct some costs as home-office expenses that are otherwise considered personal ones such as insurance premiums and house maintenance costs. However, there are people who refrain from taking up such a strategy to avoid audits. Moreover, the IRS has made it possible to get a tax break on this simpler by a person claiming for a standard deduction of $5 for 1-300 square foot of property.
Purchase tax-free bonds
This is perhaps the easiest to figure in personal finance. Divide the tax field by 1, then minus the government-approved tax bracket to determine the taxable equivalent.
Should you be in the 33 percent category, your denominator would be 0.67. Hence, you need to know the difference between bonds and people. In many cases, a tax-free bond that has an interest rate of 5 percent would be much more valuable than a taxable bond that is at 8 percent.
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