Most people care how much money they make, which is understandable, however very few care about how much money net they are getting in the bank. And I am not taking Sue Orman's style comments some of which boil down to "do not take have a cup of coffee for 5$ today as 5$ is going to be 10000$ in 30 years." This is your spending and you choose how to control it, but there is another party who shares your salary with you -- uncle Sam -- and it is up to you to use all legal ways to restrain the guy. What should you or can you do about it? Read on...
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Take care of year X in year X
One of the main things to remember that many things that you can do to change you tax situation for year X can only be changed that year, i.e. if you read this article in 2006 just before you decide to file your 2005 year taxes, you are too late to change anything but a few things (e.g. IRA contributions can still be made) for 2005 tax year. Examples: you are considered married for tax purposes if you are married on the last day of the tax year, so on December 31 it is not too late to book a trip to Vegas(related article). Or if you close on a house, then when the costs (points or property taxes) are deductible is again determined by whether you did it in the calendar tax year or not. Same thing for paying the medical expenses, even if your insurance didn't process the claim, or the provider didn't send you a bill, if you would like to get that medical payments deduction on the itemized deduction list you better send them a check in the tax year in question, cause if you wait for the next year, even though the services were rendered last year, this won't matter, what matters is when the payment is postmarked. Same again, for the property taxes or for the mortgage payment of January that you can prepay in December and hence deduct in the year it was made.
