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April 15th isn’t that far away - Time to Think About Taxes
By plrprousers | February 9, 2010
Lowering 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.
• Increase 401k contributions. Any amount you can contribute to a 401k subtracts from your tax liabilities. Taxpayers can add up to $ 16,500 if under 50 years of age, and $ 22,000 if over 50 years of age. There is still some time to increase your contributions and cut tax liability.
• Consider homeownership. It’s a buyer’s market, and there is a tax credit upwards of $ 8000 for first time homebuyers that runs from January 1st to April 30th 2010, so make hay while the sun shines.
• 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. There was also a tax break for new car purchases in the stimulus plan. 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 who itemize deductions can sometimes write off charitable contributions. Industry analyst Martin Berg of Money.com stated, “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 Expenditures. 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 adjusted gross income. Tax experts advise that you should keep track of medical bills and be ready to use them when tax time comes.
Use the various deductions wisely
In the end, it is possible to decrease tax liability by using any or all of the above tools. Any taxpayer thinking they might be staring down the barrel at a huge tax liability for 2009, is well served to know what the rules concerning deductions are. They can make the difference between having to come up with a substantial amount of money, breaking even, and even getting a refund.
Before you decide anything about your tax report or tax deductions to claim, consult with a licensed and experienced tax professional.
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