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Learn to Live by the Tax Code Print E-mail
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Personal Finance - Taxes
Written by The Frugal Nomad   
Monday, 14 September 2009 18:05
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Death and Taxes, both are inevitable. Right?  Well sort of. I mean the government taxes you even after you die by taking a bite out of your estate. It's their way of kissing you goodbye and making sure you're a good loyal citizen in the great beyond.

There's no avoiding the great equalizer - death. But taxes are an entirely different matter. Over the course of a life time, the average household can save tens of thousands of dollars in taxes. But there is one requirement that is absolutely mandatory - you need to become familiar with the tax code and keep up with the frequent changes.

Most people have this crazy notion that if they can just locate an aggressive tax accountant or go to the right tax preparer, they'll get to pay less taxes. And, a good tax professional can definitely help you take advantage of all the credits and allowances that you're eligible for. What they can't do is change the way you handle your money. And the surest way to beat the tax man is to live and die by the tax code.

Living by the tax code requires that you become intimately familiar with allowances, deductions, exemptions, tax credits, special retirement accounts, penalties for early withdrawal from an IRA,  depreciation, short term capital gains as opposed to long term capital gains and one time incentive programs like the $8,000 tax credit for new home owners. If you have pre-school children - you should understand the child care credit backwards and forwards and learn the benefits of flexible spending accounts. If you have rental property you should teach yourself how to fill out a Schedule E.  If you're getting disability, you need to figure out if only some of it is taxable.

You can't read the Tax Code the way you'd read a John Grisham novel. For one thing, the tax code is a much more sinister piece of literature that is authored by some of the most unscrupulous people on the planet - the members of congress.  So if it reads like it's in Latin - you need to learn a second language. Because once you get the basic terminology down - you're half way there.



 
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