Free Software – “ItsDeductible” – Should You Use It?
By Neal Frankle
“ItsDeductible” is an online software package that’s free and pretty useful. Tax deductions are great for everyone, especially if you are self-employed. Even if you aren’t self-employed, this software could be helpful. That goes for people who want to retire now or who are retired already. ItsDeductible helps you track the charitable donations you made throughout the year.
How It Works
Basically, you log on to the site and set up a free account. You don’t have to buy anything to use it, but you do have to provide your personal information, including your e-mail address.
Once you are on the site, you create a list of charities that you donate to. Then, you list the items you donated. That’s it. If you don’t know the value of the items you donated, the site helps you find those values. The site keeps track of all the donations you made throughout the year. When you prepare your taxes, you can print out a report or you can upload the information to Turbo Tax and the charitable deductions will be automatically updated as you prepare your annual tax return.
What I Like About This Software
First, it’s free and useful (two of my favorite words). ItsDeductible tracks thousands of different items as well as cash and securities. It’s a convenient way to keep track of your donations. It’s also really useful to use this tool to look up the value of different items you donate. That’s great because if you’re like me, you don’t have a clue as to how to value those items. As a result, if you donate many items throughout the year, you’ll end up getting more deductions and saving more money by using ItsDeductible.
And the software tells you how much those tax deductions are worth, too. When you set it up, it asks you general questions about your income. As a result, it estimates what your marginal tax bracket is and can therefore calculate the total value of items you want to donate.
Another great feature is that ItsDeductible reminds you to take a mileage write-off for all the traveling you did to help your charities. That’s something I normally wouldn’t even think of. Let’s say you run a Professional LLC as a therapist. If you donate time by traveling to see patients for free, this will at least help you get the tax write-off for your mileage.
Another benefit of the software is that it helps reduce your risk of an IRS audit. It accomplishes that by telling you if your total charitable deductions are in line with people in your tax bracket. That’s pretty handy. It’s also pretty cool that you can update your donations anytime throughout the year.
Who Should Use “ItsDeductible”
If you donate lots of non-financial items, this is a great tool – even if you don’t use Turbo Tax. There is no reason I can think of for passing this by. If you are really crafty, you might even consider using this software to launch your own weekend job or business and run these reports for others who aren’t as savvy as you.
Who Should Not Use “ItsDeductible”
If you only donate a few items to charity or if you mainly donate money or investments, you probably don’t need this. You’ll probably forget to update the information and you would do just as well by throwing your receipts in an envelope and going through it at the end of the year.
Do you think ItsDeductible would be useful to you?
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Doesn’t it seem like there is an emotional attachment to those words? Worse yet is when people think ‘it’s deductible’ when it really isn’t because they don’t qualify for some reason or another.
.-= Evolution Of Wealth´s last blog ..Mortgage Acceleration Experiment – Full Picture =-.
In my business I come across this all the time.
Many people are completely convinced that “deductible” means “free.” They don’t understand that a deduction of $1,000 reduces your taxable income by $1,000 rather than reducing your tax by $1,000.
.-= Mike Piper´s last blog ..Weekend Reading 3/26/2010 =-.
Oh man, I Just had this conversation with a buddy. He was bitching and complaining that his business wasn’t doing well and cash flow wasn’t great, but he had just leased a $550/month SUV.
When I questioned him on this (only after he brought up the cash flow problem) he said, but Evan, It is deductible. I tried to explain it doesn’t matter, even if he got a $330/mo car it would have been deductible!
I have absolutely no advice for you Neal LOL some people just don’t get it. The only thing I could come up with is maybe sit down with a 1040 and run through it quickly with him or her
.-= Evan´s last blog ..What is Valuable May not be Worth Anything – Which Do you Want? =-.
Well guys…at least now I know I’m not the only one who is stumped…!
Thanks…
I slightly touched on this with my latest post regarding the homebuyer’s tax credit. In other words, don’t buy a house just to get a 10% return. Those words are so alluring and make us want to go out of our way for credits and deductions….but if we are spending more than we otherwise would to get them, then its not worth it.
.-= Lakita (PFJourney)´s last blog ..Will You Take Advantage of the Homebuyer’s Tax Credit? =-.
If you show someone the numbers, and despite seeing what the true dollars and cents come to, they don’t want to change their mind, there probably is not much you can do at that point…
I have a friend who says” it is not the money you spend but the money you save”( in reference to buying things at good deals) No matter how much I try to convince him that this saying is just pure trouble, he insists in looking at the savings, and not the spending.
I guess that saying you can lead the horse to water but you cant make them drink rings true once again.
Any chance the “it’s deductible” is an excuse for paying off the credit card bill, because he fears not having the discipline to pay off the credit card bill? He asked for an oppinion from a trusted professional, but still tried to rationalize past it. This does seem more emotional than logical and that causes me to believe he’s afraid of not paying off the credit card bill in time, and as a result using any tool in the box to justify paying the credit card first.
Wendy, You are one insightful Pilgrim.
I think you’re right…..It’s got to be an emotional issue rather than rational one.
Still…how do you tell someone that and hope they “get it”?
I think you did all you could in that case. Showing the end result of 6% on the car loan should have been the eye opener?
The addiction to deductible doesn’t surprise me though. The word is automatically associated with “good debt”.
.-= Tom @ Canadian Finance Blog´s last blog ..5 Simple Tax Tips To Save You Money =-.
Hey come on, buy more save more!
If I was in the 40% federal income tax range (no such thing btw as Federal is 35% top right now), I wouldn’t care about a lousy $10,000. Why? B/c I’m making more than $380,000/yr.
Unless his credit card bill is like $80,000+… your fella should have no problems paying it off.
Am I missing something or have I made a brilliant analysis?
Sam
.-= Financial Samurai´s last blog ..Wealth Is An Illusion Of Happiness =-.
Sam….of course you’ve made (another) brilliant analysis…
The only problem is if I started telling people they should do silly things because they could afford to do dumb things with their money I wouldn’t be in business to long….
That’s the only problem….
People who won’t get rid of their mind blocks can’t be helped much. Sorry.
Sam, remember that on business income self-employment tax equals about 15% of net profits on top of income taxes. So if Tom is in the 25% federal bracket (over $68k taxable income if MFJ), business deductions effectively save 40%, not including state tax savings.
Neal, in my practice I try to keep people focused on the AFTER-tax interest that they pay. In Tom’s case, his car costs 5.82% after-tax, and the credit card 2.9% after-tax.
This might be one of the few cases where it helps to talk in percent, rather than dollars, as the after-tax percent comparison will be apples-to-apples.
If that doesn’t work, try electroshock therapy
.-= John Scherer´s last blog ..All the Serious Money is Indexed =-.
I talk to people about this topic all the time. It usually comes up when someone who CAN’T afford to purchase a house tries to justify it by saying but it’s deductible! This also comes up when someone buys a “toy” just because they can claim it as a business expense.
Thanks for this article. Hopefully, there are people reading this who will make more logical decisions now.
I definitely think that Wendy made a great point regarding your friend’s fear about his discipline to pay off the card.