It’s that time again… time for that end of year preparation for maximizing your tax breaks for next year. Some of these are the pretty standard tips that you should do every year, but others are only available this year, or are no longer available after this year.
1. Buy a house.
Being a homeowner carries tax breaks simply not available to renters. And the federal government has subsidized new home purchases for 1st time buyers, so it pays even more to buy a home – IF you can afford it AND you’re buying it to live in for more than 5 years, and not as an investment. The tax credits available to 1st time buyers are actually much more broadly available than actual 1st time home buyers. For example, the IRS considers you a “1st time home buyer”, for the purpose of the credit, if you:
- haven’t owned a home in the past 3 years.
- lived in your current home (prior to purchasing the new home in 2009) for less than 5 of the last 8 years.
For more details on the tax credit, check out BankRate’s tips for the Worker, Home ownership, and Business Assistance Act of 2009.
2. Home improvements.
Along with the home buying subsidy, the federal government is also providing tax credits for making energy-efficient improvements to your current home. This program goes beyond the usual energy star rated appliances on the past few years. Now you can get a credit for replacing drafty windows and doors, or replacing heating and air conditioning units.
3. Pay it forward.
If you’re a home owner, you may consider paying your January mortgage bill in December if you can. Doing so will move the interest paid into this calendar year and allow you a slightly larger deduction on your 2009 tax bill.
4. Buy a new car.
Even if you didn’t take advantage of the cash for clunkers subsidy this summer, you can still deduct the sales tax on a new car purchase – regardless of whether you itemize or not. There may be other auto related credits available even for those who live in states with no sales tax (do they still exist?), so check with your state or the IRS web site for details.
5. Sell some stocks or bonds.
This is a pretty standard tax tip, year in and year out. If you’re selling a stock or mutual fund for a loss, you can use that loss to help offset other taxes. This year however, it’s especially important because congress is likely to let the Bush tax cuts expire next year, which will not only raise income taxes but capital gains taxes as well. So, even if you have a gain selling this year, you may save on taxes by selling at today’s low rate rather than next year’s higher one.
6. Give it away now.
Make charitable donations. Besides getting a tax break, you’ll be helping even more this year since charities are hurting quite a bit this years, with the economic down turn limiting many people’s ability to donate.
Popular Posts