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Monday, June 27, 2011

The economy continues to recover from the massive downward spiral, and for many individuals, that means an diminished vacation finances. Cheap alternate options include planning a vacation within driving distance of your home or staying with family to diminish lodging fees. You also should consider allowing the US government to cover part of the vacation. When you mix business events into a vacation, you'll be able to deduct expenses from the trip. That is why most home business conferences are typically in popular tourist destinations.

There are generally two major instances when a vacation qualifies for a business deduction. First is when you are actively searching/interviewing for a new job. Second is when you find yourself traveling for your business. This second reason is why everyone should start a home business.

Looking for new employment.
The IRS applies it really nicely: "You may deduct travel expenses, including meals and lodging, you had in looking for a new job in your present trade or business. You may not deduct these expenses if you had them while looking for work in a new trade or business or while looking for work for the first time. If you are unemployed and there is a substantial break between the time of your past work and you're looking for new work, you may not deduct these expenses, even if the new work is in the same trade or business as your previous work."  You don't need to land the job to partake in the deduction.

Deductible costs while on the "business trip".
1. Traveling: If you utilize your car while traveling, you may possibly deduct either the costs for travel or simply deduct using the "standard gas mileage rate". The rate is currently set at the rate of $0.50/mile. Transportation will be fully deductible during the entire trip whether using an SUV, plane, bus, or anything else.
2. Food: Meals tend to be deductible at 50% pertaining to both you plus your business associate. If you pay for your colleagues, that as well is 50% deductible in your case.
3. Places to stay: Lodging is fully tax deductible for one's stay.  Extra rooms and charges for roll-away beds are not deductible.
4. Entertainment: 50% associated with costs of entertainment are usually tax deductible when you bring a business associate.
5. Miscellaneous: Mobile phone, internet, fax, clothes, tips, and many others things are just about all fully duty deductible.

Further rules:
1. To get tax deductions, expenses must be ordinary and necessary. Luckily in your case the government gives lots of leeway with what is ordinary and necessary. First class travel, high-priced restaurants, and expensive food can all be essential for business. Just remember that there's a difference between a great $250/night accommodation and luxurious $2000/night package. Be reasonable.
2. You should have more days relating to business activities than not.
3. You'll only be able to deduct the expenses directly regarding a spouse, child, or other if he/she is an employee with a legitimate business reason for going on the trip with you.
4. Trips where you leave the continent are more complicated.  Investigate the rules thoroughly.

Buying a New House

Buying your first house is a big first step.  Check out these tips to make your process a little easier:
 1. Explore the different loan types.  The most common loans are 30 year fixed loans.  Another option is the adjustable rate loan which means your monthly payment will change yearly based on current interest rates.  The middle ground is called a hybrid loan.  How much risk can you handle in your monthly payments?  Adjustable loans are initially cheaper, but could become much higher in the future.

2.  Don't use a realtor.  Doing the research yourself can save you 3+% of the total price of your home if you can do without your own realtor. Each realtor involved is paid 3% of the sale price at closing by the seller, and the seller passes this cost onto you in the total price of the home. I was able to negotiate the seller down an extra 3% because I didn't have a realtor. That ended up being a savings of thousands of dollars.  The catch is that I had to do all of my own research during the house search. I checked out school districts, neighborhoods, flood zones, age of the home, etc. I had to find my own comparable homes and determine the average price per square foot in each neighborhood.

3.  Can you afford your home?  
When I applied for a home loan, I was pre-approved for an insane amount of money. I almost couldn't believe it. I was pre-approved for a home that would cost 80% of my take-home pay. That would leave 20% of my salary to survive each month. SCARY! I ended up purchasing a home that was approximately 37% of my take-home pay each month which I still consider on the high end if I hadn't gotten married. Dual income makes the payments easier to handle.

4.  Shop for a cheap interest rate.  Don't just pick one bank and sign on the dotted line. 

5.  Buy the cheapest home in the neighborhood of your choice.  I bought what may be the cheapest and smallest home in my neighborhood. By doing so, I was able to purchase a home in the nicest neighborhood I could possibly afford in my geographical area of choice. Another benefit is that every home in the neighborhood is selling for more money. When I eventually put my home up for sale, I will offer comps of other houses in the neighborhood - all of which are more expensive. My home has an excellent chance of appreciating in value. The most expensive house in the neighborhood has no comp homes in the neighborhood to demonstrate its worth and likely will not appreciate as well as the cheaper homes.

6.  Low ball offer.  It is a buyer's market.  What have you got to lose?

7.  Use an attorney at closing.  You don't want to be signing paperwork that you don't understand.

8.  Don't get emotionally attached to a home before the keys are in your hands.  A lot can go wrong in the home buying process.  Try to enjoy yourself and relax.