You don’t have to be rich, like many of the presidential candidates seem to be, in order to find some great tax benefits. Indeed, some of the very ways that candidates like Newt Gingrich and Mitt Romney reduce their tax liability are available to the rest of us “ordinary” folks.
Kiplinger  recently offered some interesting tips about what you can do to improve your situation in terms of taxes by taking cues from Newt Gingrich and Mitt Romney . Some of the suggestions include:
- Invest in muni bonds: There are tax advantages associated with municipal bonds , including tax-free interest at the federal level. Both Gingrich and Romney invest in municipal bonds, although Gingrich takes better advantage of the opportunity.
- Donate appreciated assets: When you donate some of your assets to charity, you can get a deduction for the fair market value. Provided you have had the asset for at least a year, you can take this deduction when you donate an appreciated asset to charity. Make sure you understand the rules associated with the deduction. However, as long as you donate the asset , neither you nor the charity is required to pay taxes on the appreciation. You get the full value of the deduction, using it to offset your income.
- Tax loss harvesting: You can also harvest your stock losses , and carry over what you don’t use this year to another year. After you offset your capital gains with losses, you can offset other income. However, you are limited in the amount you can deduct against other income. So, you can carry it forward.
- Watch out for underpayment: Newt Gingrich underpaid one year — and was hit with a penalty. Make sure you have sufficient withholdings, and make sure that, if you pay estimated taxes, you are doing so in a sufficient amount. There are ways to avoid the penalty, by paying 90% of what you owe, or paying 100% of what you paid the year before.
- Get back overpaid Social Security tax: Only a certain amount of your income is subject to Social Security tax. However, if you have more than one source of income, you might have extra money withheld from the different sources. Add it all up, and if you have overpaid on your Social Security tax, you can reclaim it.
- Medical expenses: If you pay out of pocket for medical expenses, you can deduct the amount beyond 7.5% of your AGI. This is one way to offset some of the high cost of health care.
Double Check Your Deductions
Make sure that you double check your deductions. You want to make sure you can get what you are entitled to. You certainly don’t want to do anything illegal or evasive, but you can do your best to ensure that you aren’t paying more than you are legally required to.
Various tax prep software programs can help you check your deductions, and you can also get help from tax professionals who keep up with the latest changes to the law. In some cases, getting the help of a professional can be worth it, since the savings from your taxes can offset what you paid.
(Photo: alancleaver_2000 )