It’s Time to Think about Taxes Once Again
22nd December 2009 by Tax Man No CommentsLowering your tax liability
Industry analysts are predicting that a tangible change in the economy won’t be seen until mid-2010, but there are still some things you can do to lessen your tax liability this year.
• Contribute more to a 401k. Any amount you can contribute to a 401k subtracts from your tax liabilities. Taxpayers can contribute up to $ 16,500 if they are under 50 years old and $ 22,000 if they are over 50 years old. There is still some time to increase your contributions and cut tax liability.
• Think about home ownership. It’s a buyer’s market and with a tax credit of up to $ 8,000 for first-time homebuyers from January 1 through April 30 of 2010, now is the perfect time to buy.
• Pay for a college education. The federal stimulus plan created tax breaks for college expenses. The American Opportunity Credit replaced the Hope Credit, and lowers tax liabilty for taxpayers to meet certain requirements.
• Get a new car. The stimulus plan also included a tax break for new-car purchases. Anyone who buys a new car this year can deduct state and local sales taxes and excise taxes paid on a purchase price of up to $ 49,500. Car.com expert Miles Bradman said, “This is the perfect time to get a new car and not just from the purchase price standpoint. In former years a consumer may have needed a large loan to cover a down payment, whereas now small unsecured personal loans could very well do the trick.”
• Give to charity. Taxpayers itemizing can write off charitable contributions, within guidelines of course. Martin Berg, the industry analyst of Money.com said, “A lot of people forget to count their cash gifting when calculating donations. Always include noncash donations, appreciated stock, and cash. They also count out of pocket donations to charity, like a 14 cents per mile in travel costs for doing charitable work.”
• Self-employed tax breaks. Self employed taxpayers have a lot of ways to deduct from taxes. Costs of equipment, such as fax machines, computers, or printers, can often be deducted, along with any home office expenses, like rent, homeowner’s insurance, and utilities.
• Medical expenses. For those who itemize deductions, medical expenses can lower a tax bill substantially. A taxpayer qualifies for this deduction if expenses for medical costs exceed 7.5% of your Adjusted Gross Income. Tax experts recommend keeping track of medical bills, and keep them on file until tax season rolls around.
Use the various deductions wisely
In the end, it is possible to decrease tax liability by using any or all of the above tools. For any taxpayer who believes that he or she may have a large tax liability for 2009, it’s useful to know what the rules are for taking deductions. They can make the difference between getting a refund, breaking even, or worse - having to actually pay those jackals at the IRS.
Before you decide anything about your tax report or tax deductions to claim, consult with a licensed and experienced tax professional.
