I don’t have much money, but if pennies started falling from heaven – okay, make that $100 bills – I’d gather up those Franklin portraits and put them to good use.
To keep as much of that cash as possible during the upcoming tax season, I’m planning my tax return. I’ve joined millions of others eyeing legal ways to keep hard-gathered cash out of the hands of the IRS and instead inside their or their loved ones’ pockets.
I stress the word “legal,” because Jesus said to “…render unto Caesar what is Caesar’s” regarding taxes. Not only is his teaching the right thing to do to support much-needed public infrastructure but also a prudent lesson to avoid prosecution.
But first, those legal thoughts turn to Individual Retirement Accounts, IRAs, both Roth and traditional, then wander to other traditional tax shelters. Simply put, with an IRA cash goes into the retirement fund before taxation. When you pull the cash out later at retirement, the taxman cometh. The Roth IRA flips the process, taxing the cash before stashing it but not when the IRA cookie jar gets raided at retirement. The Roth IRA benefits those expecting to climb into a higher tax bracket by the time they reach retirement age.
Another tax shelter is, amazingly, starting your own business or turning your hobby into a business. Numerous “how-to” advice can be found by plugging “owning your own business” into a search engine. Good record-keeping for this shelter is essential.
Charities follow just because giving to the poor is the right thing to do. I’m poor relative to others in Loudoun County, Va., so I know. Such jesting aside, there’s nothing like feeling the warm glow of giving your money to a reliable charity that’s going to help others. But how do you know the charity you pick to put a peck of pennies into won’t waste them on overhead or line some CEO’s pockets?
I favor Charitynavigator.com. Remember that the site is just a guide based on statistics. Educated guessers like me know that statistics are only as good as the methodology used to gather them. Charity Navigator bases their ratings on public IRS forms that can mislead due to their nature.
In my case, first I follow my gut and contribute to the church I attend because if I didn’t believe it made efficient use of donated funds I wouldn’t be going there. Next, I think of a cause I’m most adamant about – in my case affordable housing. This comes from having lived a few months in a car that was, interestingly enough, loaned me by my church.
The most visible charity pushing affordable housing is Habitat for Humanity, but both their efficiency and effectiveness varies from chapter to chapter according to Charity Navigator ratings. So again I go with what I know, stay local and choose Good Shepherd Alliance to donate to. This is providing, of course, I have the cash to donate. Having used their premises to shower and shave recently – the car I was living in didn’t feature a bathroom – I’ll likely have to wait a while until I can give to them. The example remains, though. If you can give to a tax-deductible charity, do so. Your conscience and I will thank you and you’ll have an easier tax burden.
On that note I’ll stray out of the realm of tax shelters and into the realm of trying to earn enough to need such shelters.
And where would I put hard-earned dollars if I wanted them to grow faster than a savings account or company-matched 401k? Well, I’d invest in a company I knew something about. Following my gut, direct observation and research, I currently favor Orbital Sciences Corporation. The ticker symbol is ORB. One glance at its stock price’s rise during the past year will show why it’s a favorite of mine.
Meanwhile, prize your faith above your Franklins and remember “in the abundance of counselors there is wisdom.”