Ten money-saving tax reminders
If you haven’t already filed, it’s time to get started on your 2009 tax return. These 10 money-saving tips might save you so much on taxes that you can hold off applying for short term installment loans or payday cash advances.
First-time homebuyers may be entitled to a credit of 10 percent of the price, for a maximum credit of $8,000. The homebuyer credit is not limited to first-time buyers. Buyers who owned homes and bought new ones after Nov. 6, 2009, may be entitled to a credit of 10 percent of the purchase price, for a maximum credit of $6,500. Buyers must have lived in their previous homes for five consecutive years in the past eight, must have a house under contract by April 30, 2010, and must close by June 30.
2. Energy-saving improvements
For 2009, homeowners may be entitled to credits worth 30 percent of the amount spent on energy-saving windows, water heaters and other qualified improvements, up to a combined limit of $1,500 for 2009 and 2010. Installation of solar, wind, or geothermal energy systems may entitle homeowners to 30 percent credits with no limits.
Sales taxes on purchase prices of to $49,500 for new cars, light trucks, motorcycles, and motor homes purchased after Feb. 16, 2009, can be deducted on 2009 returns. Vehicles purchased through the Cash for Clunkers program are included. Taxpayers do not have to itemize deductions to claim the credit, although in some states, it may sometimes be more advantageous to include sales taxes in itemized deductions. The credit is limited to certain income amounts, and depending on income, some taxpayers may receive only partial credits.
4. College students
In 2009 and 2010, the new American Opportunity Tax Credit allows taxpayers to claim $2,500 per student per year for the first four years of college. The Hope Credit provides $1,800 per student for the first two years of college, and the Lifetime Learning Credit offers up to $2,000. Income limits apply, and a taxpayer can use only one form of educational credit.
For 2009 only, the first $2,400 of unemployment income is nontaxable. Unemployed married couples may exclude benefits of up to $4,800. Whether or not you were unemployed, if you switched jobs or looked for a job, job-search expenses (travel, career coaching, employment agency fees, etc) may qualify as miscellaneous deductions. Combined miscellaneous deductions must exceed 2 percent of adjusted gross income to be written off. Taxpayers who were out of work last year and had to pay for COBRA or other health insurance may add those expenses to the usual out-of-pocket medical expenses, making it more likely that they’ll meet the deduction threshold of 7.5 percent of adjusted gross income.
6. Freelance work
Taxpayers who took on any kind of paid freelance work in 2009 to make up for pay cuts or job losses, must report the income but can deduct numerous business expenses, such as supplies, equipment and work-related vehicle mileage. In the case of a home office, freelancers may even be entitled to deduct prorated amounts of mortgage payments and utility bills.
7. Moving for work
Taxpayers who relocated to accept full-time employment can sometimes deduct moving expenses like truck rental or moving company fees, packing supplies, storage and travel costs. To qualify for the deduction, the new job must be at least 50 miles farther from a taxpayer’s home than the previous job was.
8. Earthquake relief
Charitable donations to Haiti made before March 1, 2010, are deductible on 2009 tax returns. A new bill currently in the House would allow deduction of last-minute donations made to Chile before April 15, 2010, and would also extend the time for making donations to Haiti until the April 15 filing deadline.
9. Investment losses
Taxpayers who sold securities at a loss in 2009 after owning those shares for more than a year may use the losses to offset capital gains. If a taxpayer had losses and no gains, up to $3,000 of net loss can be set off against ordinary income and any remaining amount can be carried forward to future tax years.
10. Federal disaster areas
Homeowners whose houses were damaged in declared federal disasters and not fully covered by insurance may be able to claim the losses, even without itemizing deductions. For 2009 only, after subtracting the first $500 of the loss, there is no limit on the amount, and any losses that can’t be used in 2009 can be applied retroactively to 2008 taxes.