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Tax Tips

Although tax season does not start until Jan 2010, you need to start your tax saving strategies now. Few tips are provided below:

One way to lower your taxable income for the year is to contribute to or open a retirement plan, such as a 401(k), 403(b), deductible IRA, You can make contributions for your 401(k)s and 403(b)s until up until Dec. 31, 2009. But you have until April 15, 2009, to make a contribution to an IRA. Make a maximum pre-tax contribution to your 401K plan. For 2009, IRS allows to age 49 an annual amount of $16,500 and for those age 50 years and over $22,000. This could save you anywhre between 15% to 35% of taxes depending on your tax bracket.

If you are itemizing the deductions - make an additional one month mortgage payment - this will increase the amount of interest you paid in 2009, it would be 13 months interest instead if 12 months.

If you have to pay next semesters fees, pay them in December.

Do you have relatives you are finacially supporting? If yes, provided you meet certain conditions, you may be able to claim them as your dependents.

Medical expenses. You can deduct them only if they exceed 7.5% of your AGI. If you think you're close to the 7.5% requirement, consider having an elective or necessary procedure before the end of the year.

Are you planning to provide gifts this holiday season, you can give up to $13,000 per person to any number of individuals without having to file a gift tax return. The limit is $26,000 if you're married and the gift is from you and your spouse.

Donating to charities before the first of the year counts as a deduction on your return. You can make donation to charities by Dec 31. Be sure to get a receipt from the charitable organization. Keep in mind that the deduction for donated property is limited to the item's current fair market value.

Do you have loss making shares? If you have a large net capital gain so far this year, you might want to consider selling some stock to generate a loss before year's end. Doing so could reduce the amount of tax you pay. Remember that if you do sell stock to generate a loss, you are prohibited from purchasing substantially identical stock within the period beginning 30 days before and ending 30 days after the sale that generated the loss.

Posted by topi on 2009-11-03 14:23:53 | Rating: