Put Wide-Ranging New Tax Provisions To Your Advantage

Friday, February 26, 2010, 7:23 AM | Leave Comment

By now, you should have received your W-2, 1099’s and all documents that will help you do your tax calculations and then filing. If you have, then it’s time to start tackling your taxes, at least the preliminary data entry, either using tax software or doing it manually with paper and pencil. For your convenience, I have made a list of some tax services that either are free or have minimal price attached to it.

And don’t be afraid to do your taxes yourself once you understand basics of your income tax return. On the contrary, you can make it the most wonderful time of the year [Andy Williams].

Here are some points to remember and do, if applicable to your situation.

You still have time to reduce your taxable income

You should know this already but just a reminder that you can reduce your taxes if you make a 2009 tax-year contribution to the below before April 15.

  1. Traditional individual retirement account (IRA)
  2. Health savings account (HSA)
  3. Simplified Employer Pension (SEP) IRA – used primarily by self-employed individuals

In the case of a SEP or an IRA, taxes on deductible contributions and earnings are deferred until you withdraw money from either account, typically in retirement. However, contributions to an HSA are never taxed if the money is withdrawn and used for qualified medical expenses.

Any tax software package will tell you how much you can contribute to each one of the three. You can find a complete list of changes on the Internal Revenue Service site.

Other tax provisions you might be able to take advantage of

Again, your tax software will tell you about the following and if they are applicable to your situation.

  1. First-time and repeat home-buyer credits
  2. Education expenses credit
  3. New vehicle deduction
  4. Energy credits
  5. Midwestern disaster relief
  6. Haiti earthquake contributions
  7. Unemployment provisions

To itemize or not to itemize. That’s the question.

You have to give some extra consideration this year whether to itemize or take standard deduction.

  • Standard deduction increase

    The standard deduction is $11,400 (up $500 from 2008) for married taxpayers filing a joint return and $5,700 (up $250) for single filers. In addition, joint filers can tack on up to $1,000 of real estate tax paid; single filers, up to $500. Plus, the deduction for sales tax paid on a new vehicle can also be added to the standard deduction.

  • Increase in income threshold for itemized deduction phase-out

    For 2009, the value of your itemized deductions is reduced when your adjusted gross income exceeds $166,800, regardless of filing status, compared with $159,950 in 2008.

In a Nutshell
You can do your taxes and e-file the forms yourself. Use the tax services mentioned. If you have not used any of the tax software package before, it might be a good time to try one out. You still have adequate time to do your preliminary calculations and then finalize it. I am sure you can file your taxes, completely done, by the middle of March, one month ahead of the deadline, if you start now.

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