Is it best to aim for a certain amount of tax-deductible expenses?

Question

I don't understand tax deductions. They're good for reducing your taxes, but then, spending money on lots of stuff isn't exactly good for my wallet. So is there some sort of expenses sweet spot or what?

Answer 1

The "sweet spot" if you want to call it that is what you have to spend and are entitled to deduct. No more, no less.

Spending money purely to save on taxes is a fool's mission. The tax rate would have to be over 100% for that to actually save you anything.

Answer 2

There isn't a "sweet spot", although anything that totals less then the standard deduction for your filing status doesn't save you anything. After that, you save in taxes a percentage of each deductible item.

Standard deduction this year for someone whose filing status is "single" is $5350; for a married couple filing a joint return it's $10,700.

Answer 3

I assume you have some kind of business activity and aren't only trying to deduct nonbusiness expenses.

There is certainly tax planning. You can plan your expenses to optimize your tax situation. You can choose different depreciation methods. You can choose to purchase or lease buildings and equipment. You can choose whether to have business use of your home.

Meet with an experienced tax person and have that person review your business activity and give you some advice as to what expenses are allowable, your options for depreciating equipment, and more.