My financial goals for 2012 were rather simple; pay down debt and rebuild our emergency savings account. To reach these goals, our entire family agreed to live as frugally as possible by slashing costs, working harder, and doing as much as possible for ourselves.
One area that we scaled back on was the amount of our charitable deductions. Instead of donating money and items in 2012, we donated our time. We helped at church rummage sales and neighborhood cleanup days, installed sod in a city park, grew food for our local food bank, and volunteered our time at several non-profit agencies.
Charitable donations weren't the only things we scaled back. Instead of hiring maintenance crews for things like lawn and pest care, gutter cleaning, appliance repairs and minor fix-it jobs on our rental properties, we did all the work ourselves in hopes of saving money which could be then spent on lowering debt.
The good news is that our frugal living allowed us to pay down nearly $12,000 in debt. The bad news is that we ended up owing $2500 more in taxes because of it.
While donating cash to a charity is deductible, donating our time is not. And the money we saved not hiring handymen and other service providers? This boosted the income on our rental which resulted in increased taxes. Avoiding this problem in 2013 means that we have to be more diligent in tracking our expenses that are deductible.
We might not be making cash deductions to charities but we are using up gas and buying supplies for charitable events. These costs are deductible and ones that should be tracked to help lower our taxes for next year. Also worth tracking are all the donations of used clothing and other household items, food purchased for food drives, vegetable seeds, the cost of ingredients for 4-H barbecues and other non-profit events, and so on.
As far as expenses connected to our rental, there isn't a whole lot we can do there except to record our mileage for rental-related errands and keep track of all expenses, even little ones like spark plugs and trash can liners. This expenses might not add up to a whole lot, but it's better than having no deductions.
Owing an extra $2500 in taxes this year really caught us by surprise. For next year, we will be more attentive to tracking deductions so that this won't happen again.
*Note: This was written by a Yahoo! contributor. Do you have a personal finance story that you'd like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.
More by this contributor:
- Banking & Budgeting