Thursday, December 17, 2009

2009 Tax Tips

It's seems as though 2009 has flown by. It just seemed like New Year's Day now we are approaching 2010. Unfortunately we are also approaching tax season. A lot of the laws from last year have changed so be sure to read the instructions when filing your 2009 taxes.

Many Americans miss out on deductions because they take the easy route and just use the standard deductions. If you do your taxes yourself or hire a tax professional to do your taxes use the standard deduction and itemize to see which method gives you a bigger return. Last year many Americans had refunds they did not receive including some who had an incorrect address on file. The IRS setup a section on their website for unclaimed tax refunds.

Here are 7 Tips to Save Money on Your Taxes.

1. Charity. If you buy food, drinks or supplies for a fundraiser or charitable event you can write-off the money you spent including the mileage costs. You can deduct $.14 per mile.

2. State Sales Tax. If you live in a state that does not charge state taxes you can either deduct state and local sales taxes or state and local income taxes but you cannot deduct both. If you choose sales tax remember to include all items eligible for sales tax. Check the IRS website sales tax tables for your state.

3. Refinance. Don't forget to include your refinance costs in your taxes this year. When you refinance you have to deduct the mortgage points over the life of the loan so it's better to refinance for less time than your original loan. If you previously had a 30 year loan refinance to 20 years or less. This equals to deducting 1/20th of the points a year if it’s a 20-year mortgage. It equals out to $20 a year for each $1,000 of mortgage points you paid.

4. Reinvested Dividends (DRIP). Reinvested dividends cannot be deducted on your taxes but you can subtract the amount from your total taxable income which can save you money because it reduces your taxable capital gains.

5. Property Tax. In 2009 property tax laws changes. Now homeowners who take the standard deduction can include up to $500 for single filers and up to $1,000 for married filers towards property taxes. You have to file a Schedule L to claim the property tax.

6. Casualty Loss. If you claim the standard deduction you can add casualty loss to your standard deduction amount if the loss occurred in an area that was declared as a disaster area by the President. You will have to file a Schedule L with your tax return to include the loss.

7. Estate Tax. If you inherited an Individual Retirement Account (IRA) from an estate that was subject to estate taxes you can get an income tax deduction for the amount of estate tax paid on the IRA you received, i.e. if you inherited a $100,000 IRA, and the money included in the estate added $45,000 to the estate tax bill – you can deduct the $45,000 on your tax returns as you withdraw the money from the IRA. If you withdraw $50,000 in one year, you can claim a $22,500 itemized deduction on Schedule A which saves you money.

Your goal for 2010 should be to get out of debt and improve your financial life. Good luck!

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