The author starts out with a good statement – “I personally believe that it is never a bad time to plan or even talk about taxes”.
“The Truth Behind Tax Deduction Advice” reacts to an article on Kiplinger’s website titled “10 Ways To Lower Your Taxes”, and states, “Articles like these, whether in financial magazines or on blogs geared toward personal financial topics seem to be guilty of stating a deduction, and then summarizing them without going into full detail including the drawbacks and limitations.”
I agree with what the author is saying. Truth be told, a separate article or post could be written about each of the “10 Ways” discussed by Kiplinger.
The message of the LET’S BLOG MONEY post is similar to that of my previous TWTP post “A Tax Deduction is Only Worth What It Is Worth”.
Oft times a client will read an item that says, as the Kiplinger article did, you can save taxes by increasing your deduction to charity. When sending me their tax “stuff” they include a highlighted or underlined note – “I gave an extra $500 to charity this year”. They read the article, took the advice literally, and anticipate a bigger refund because of their action. Unfortunately I have to tell them – “That is very nice, and I am sure the charity appreciated your gift, but you do not have enough total deductions to itemize, so the extra $500 doesn’t do a damned thing to reduce your tax liability”.
Clients are always including clippings of articles on taxes when sending me their “stuff”, as if they are telling me something I don’t already know.
Included in the post’s comments on Kiplinger’s advice to give to charity is –
“If you are looking to lower your tax bill, especially if it is due to the fact that you need the extra money in the refund, then why would you spend money to save even less on your return?”
An excellent point! What is being said here is, as I have said many times before, it makes no sense to spend $100 to save $30. You are not saving $30 – you are losing $70!
Never spend money solely for the purpose of getting a tax deduction. Spend the money because you need to or want to and, if deductible, get a secondary benefit of tax savings.
Yes, you can save taxes, if you itemize, by making a contribution to a qualified church or charity. But you will not put any additional money in your pocket by doing so. You will be “out of pocket” by the amount of the contribution less the probably 15% - 35% tax saving.
Another thing to consider is that many tax deductions and credits are phased out or completely disallowed based on your Adjusted Gross Income. An article or blog post may tell you that you can deduct, or get a credit for, tuition and fees paid for your dependent’s college education, but your level of income may be such that you do not get the full, or any, tax benefit.
A blog post or online or print article or column by a non-practicing tax professional that discusses what types of things are tax deductible may give you something to think about, and something to discuss with your own tax professional, but you should never act blindly on what you read. Check it out with your tax pro first before doing anything.
It is important to remember that many online, magazine and newspaper items on taxes are written by professional writers and not by professional tax preparers. Regarding the item from the Kiplinger website that the post discussed it is pointed out that – “the author, Kimberly Lankford does not have anything regarding an accounting or tax background on her mini-bio”.
And if you read any fine-print disclaimer for such items it will no doubt say that the item is for “information purposes only” and “does not constitute legal or tax advice”. Often such disclaimers advise readers to consult their own tax professional.
So both the Green Bridge Advisors and I both say – LET THE READER BEWARE!