The Federal Tax Credits Blog

Posts Tagged ‘tax credit vs tax deductions’

Question: Should I take a large 401k deduction to lower taxes or pay what I owe with a credit card(vs living off it)?

Answer: Better whip out the credit card!

You can’t take any more 401(k) deductions for 2006. Unlike an IRA, there is no “grace period” for 401(k) deductions that would allow you to add anything to it after the end of the tax year. And you can’t just write a check and deposit it to your 401(k) plan. A 401(k) is a salary reduction plan, not a depository account.

You MIGHT be able to open an IRA and make a deductible contribution to it. You have until April 17, 2007 to do that. However since you are covered by an employer sponsored retirement plan there are income limits that may bar the deductiblity of any IRA contributions. For a single taxpayer, the deduction starts to fade when your AGI hits $50,000 and is gone when it hits $60,000.

Arsonists, whiskey are not tax deductible

By Edward J. Loughrey So, they put out pet food to attract wild cats. The cats came, ate the food and cured the rodent problem. The owners deducted the cost of the food and when it went to court, they ruled that it was a valid business expense. A taxpayer had to hire someone to watch his pet all day while he was at work.

Recovery Act Tax Benefits