13 Tips to Lower Your 2009 Taxes:
Yes, There’s Still Time if You Act Fast!
by www.SixWise.com

Tax season is probably the last thing on your mind during the holidays, but with New Year’s just around the corner now is your last chance to lower your 2009 tax bill. Fortunately, there are a host of options to trim your bill in minutes, so if you act fast you could save some major moola come April 15, 2010.

1. Donate or give monetary gifts. You and your spouse can give up to $13,000 each without having to pay gift taxes. Now is also a great time to make donations, as you can write off monetary and non-cash charitable contributions if you itemize your expenses. You can also include costs you incurred to help a charity, such as transportation costs while volunteering (you can deduct 14 cents per mile).

2. Delay your invoices and receivables. If you're self-employed, delay December billings until January. This will reduce your taxable income for 2009. Similarly, it may be in your best interest to ask your employer to delay a holiday bonus or December payment until 2010 as well.

3. Pre-pay medical expenses. You can only deduct medical expenses if they exceed 7.5% of your adjusted gross income. So if you know you are close to approaching (or past) this threshold, pre-pay this year for whatever you can (prescription medications, doctor's bills, etc.). This way you'll have a larger deduction. If your medical expenses won't exceed the limit, then by all means wait to pay.

Medical expenses that are typically deductible, according to the Wall Street Journal, include insurance premiums, Medicare Part B and D premiums, co-payments for drugs and treatments, weight-loss plans (if medically necessary), lead abatement, bandages, wigs after chemotherapy, acupuncture, and medical travel (24 cents per mile).

4. Pay your January mortgage payment this month. By paying by December 31, you can include the interest deduction on your 2009 tax return.

5. Make estimated state tax payments for fourth quarter. By doing so before December 31 you can take the deduction for your 2009 taxes.

6. Pay your property taxes early. If your taxes are coming due in January or February, you can pre-pay them before December 31 and use them for a deduction in 2009.

7. Sell your losing stocks and mutual funds. By selling stocks and other investments that you've lost money on, you'll be able to use the losses to offset any gains you've made on other investments. If your loss is more than your capital gains, you can then use it to offset up to $3,000 in ordinary income. If you still have more loss after that, it can be carried over to future years. Be advised … you cannot sell shares, take a loss deduction and then buy them back in a 30-day period, as that violates IRS “wash sale” rules.

8. Buy a new car. If you’re in the market for a new car, now’s the time to buy. Doing so before January 1 means you can deduct sales and excises taxes and other fees on up to $49,500 of the purchase price.

9. Buy a new home. Similarly, if you’re thinking of buying a home, you can still take advantage of the unprecedented dollar-for-dollar tax credit of up to $8,000 if you’re a first-time homebuyer. If you already own a home, and have lived their for five of eight years before the new home’s purchase, you will also qualify for a $6,500 tax credit.

The credit is available through July 1, 2010 as long as you have a contract in place before May 1, 2010. You can use the credit on either your 2009 or 2010 taxes.

10. Pay your January college tuition. If you'll be taking classes in the first quarter of 2010, you can prepay the tuition now and get a 2009 tax benefit from the American Opportunity credit.

11. Max out your IRA, 401(k) and other retirement plans. Every contribution you make will lower your taxable income and boost your retirement savings. You can contribute up to $16,500 to a 401(k) (and $22,000 if you're over 50). The IRA contribution limit is $5,000 or $6,000 if you are over 50. The Simple IRA limit is $11,500 or $14,000 if you are age 50 or older.

12. Use up your flexible spending account (FSA). If you set aside pre-tax income in an FSA, many employers require you use it up by December 31. Although the deadline may be extended to March 15, not all employers use this option. Some ideas to quickly use up excess FSA money include eyeglasses, prescription sunglasses, dental work, smoking cessation programs, physical therapy, massage therapy for an injury, counseling, contact lenses, hearing aids, drug and alcohol treatment or chiropractic care.

13. Stock up on supplies if you’re self-employed. You can deduct all the supplies you use for your business, so it’s a good time to buy any extra equipment (computer, printer, fax machine, etc.) or supplies (paper, stamps, printer ink, etc.) you’ll be needing.

Whew! We hope you’ll take a few minutes (or a few hours) to go through this list and minimize your 2009 tax bill. It will be well worth your time come April 15. And if all of this tax talk has got you feeling more than a little frazzled, pop in the wonderful Pure Relaxation or Sleep Easy CD. They’re a lifesaver whenever you’re feeling stressed … and we bet you’ll be so glad you have them on hand as tax day comes nearer.

Recommended Reading

What to Do if You Can’t Pay Your Taxes

The Most and Least Tax-Friendly Places to Live in the USA

Sources

WSJ.com November 13, 2009

MSN Money November 24, 2009

Forbes.com December 10, 2009

WalletPop.com December 2009