Seven Ways You Can STILL Save Money on Your 2008 Taxes
by www.SixWise.com
Tax season is upon is but no worries -- there’s still time to lower your tax bill, or increase your refund, for your 2008 return.
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Tax season doesn’t have to be a headache, especially if you max out your deductions to minimize what you owe.
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After all, individual income tax is the largest single source of revenue for the federal government, and has been since 1950. In 2007, for instance, individual income tax made up 45 percent of the government’s revenue while corporate income taxes made up 15 percent. Surely you’d like to keep your contribution to this large piece of pie as small as possible, so here we’ve described some tips to do so.
And contrary to popular belief, once the New Year arrives the book is not yet closed on the previous year’s tax bill. Here’s what you can do NOW to save money come April 15.
Max Out Your IRA Contribution
You can contribute to your IRA right up until April 15 and still count it on your 2008 return. For 2008, the max you can contribute is $5,000 if you’re age 49 or younger, and $6,000 if you’re 50 or older as of the end of 2008.
Take Advantage of Last Year’s Stimulus Checks
Remember the 2008 stimulus checks of up to $600 a person and $300 a child? These were actually based on your 2007 income, and as a result if yours exceeded $75,000 as a single filer or $150,000 as a joint filer, you likely received a reduced (or no) refund.
If, however, your income took a dive in 2008, as it has for many in this economy, you may now be eligible for a “recovery rebate credit” for the full amount or the amount your original check was reduced. Likewise, if you had a child in 2008 you may be able to claim a recovery credit of $300, or if you are a college-aged young adult who began supporting yourself in 2008, you may be able to claim a $600 credit.
Property Taxes Can be Claimed as a Standard Deduction
If you normally don’t itemize deductions, this year you can still deduct your state and local property taxes (which are normally only an itemized deduction). For both 2008 and 2009, you deduct up to $500 as a single filer and $1,000 for joint filers, and this gets added on to your standard deduction.
National Disaster Losses Are Also Now a Standard Deduction
If you had qualified casualty losses in declared national disaster areas (such as Midwestern flooding, certain Kansas storms or California wildfires) you can add your losses to your standard deduction, less any relief income, insurance payments and a deductible of $100 for 2008 or $500 for 2009.
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If you lost money on investments you sold last year, take comfort in the fact that your losses are deductible.
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Previously, casualty losses had to be itemized and were subject to limitations.
Investment Losses
The silver lining to the down market is that you can deduct any losses you had in 2008 from selling investment assets for less than you bought them. You can deduct up to $3,000 or $1,500 if you’re married and filing separately for capital losses.
Tax Breaks for Teachers, College Tuition
Teachers can deduct up to $250 for classroom expenses that were not reimbursed. Meanwhile, if you paid college tuition and fees in 2008, you can deduct up to $4,000.
Mileage Deductions
Because gas prices were so high in the first half of 2008, the standard mileage rates were increased. Remember you can deduct miles driven not only for business purposes but also (at a slightly lower rate) for medical or moving expenses, or driving in charitable activities.
Recommended Reading
The Most and Least Tax-Friendly Places to Live in the USA
Tax Audits: What Signs Make You More Likely to be Audited by the IRS?
Sources
Reuters.com March 5, 2009
Fidelity Investments February 27, 2009
MSN Money 2008 Tax Law Changes
TaxPolicyCenter.org