Tuesday, 30 December 2008 23:00

Find Your Tax Deductions

Written by  Charlotte Anderson
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Charlotte Anderson Take Time to Find Your Tax Deductions!

Clearwater FL - Tax time is just around the corner, so you will be putting together the data you, or your tax preparer, will need to prepare your tax return. While assembling the data you can dig out information to help you keep more of your hard-earned money! Here are seven tips you can use to add to your tax deductions and SAVE when the return is filed.

1. Donations to Charity: Donating cash, property, clothing, household items or other goods is a great way to get a tax break and help a worthy cause at the same time. If you donated cash to an eligible charity this year, you can generally deduct up to 50% of your total income when you pay your taxes in April.

Important reminder: Under the newPension Protection Act, as of January 1, 2007 you need a written receipt for all charitable donations, regardless of the amount. So make sure you save receipts so you can take full advantage of your charitable giving.

2. Deductible Expenses: Do you have medical bills, state and local taxes, mortgage payments, or property taxes? If so, any payments you made before December 31are deductible on this year’s tax return. Making an extra mortgage payment or paying off outstanding dental or medicalbills is a great way to offset your tax bill. Just make sure you aren’t subject to the Alternative Minimum Tax (which generally applies to high-income or upper-middle income households) and that you plan to itemize your deductions.

3. Deferred Income: If you are close to a lower tax bracket it is fine if you defer some of the income. For example, yearend bonuses: deposit after the new year begins; savings bonds: If you have US savings bonds that mature late in the year you can defer taxation on that income by waiting until next year to cash them; self-employed: defer payments by simply delaying billings and depositing income after the end of the year.

4. Offset Your Capital Gains: It may be too late to do this for 2008 taxes, but bear in mind for next. Take a good look at your investment portfolio and consider selling losing stocks to offset your capital gains. The loss from the stocks will counter the gains from others, lowering your tax bill and softening the blow of under-performing stocks. Net losses can be deducted in full against other income up to a $3,000 annual maximum write-off.

5. Flexible Spending Accounts: Does your employer offer a flexible spending account? It’s a great way to save cash by using tax-free money to pay eligible medical and childcare expenses. You can use it for medical or dental expenses that aren’t covered (or fully covered) by insurance, like glasses and certain overthe over the-counter medications. You can also set up an account to pay for childcare while you work or attend school.

6. Contribute the Maximum to Retirement Accounts: Retirement accounts are an excellent way to lower your tax bill, so make sure you’re making the most of this break. If you can swing it financially, raising your 401k contributions to the maximum amount allowed will really take a bite out of your tax liability. You might also consider contributing year-end bonuses to a tax deferred 401k account. If you contribute to an IRA, you can make contributions for this year through April 15, 2009 for both traditional and Roth IRAs. This helps you build future security while also lowering your tax bill. But remember, when it comes to retirement contributions, it’s to your advantage to make contributions sooner rather than later since you’ll enjoy compound income growth.

7. Dig Dig Dig to Find all Possible Business Deductions: If you have your own business or if you spend personal money to earn money while employed, many expenses can be deducted. Take time now (if you haven’t done it already) to dig up receipts for purchases that helped you earn. This includes things like office supplies, websites, postage, cost of materials, etc. If you bought a new computer or other equipment which you use for business, that can be deducted. If you use purchases only partially for business, a percentage can be deducted. Mileage is a big help if it was in pursuit of business (but not commuting from your home to your regular office) so keep track of miles. Look on your bank statements, credit card statements and even cash receipts for those records and turn itemized summaries in to your tax preparer so they can be put to use. Also, consider delaying any new hires for your business until after January 1st as President Elect Obama is reportedly considering a $3000 refundable tax credit for each new full-time employee added to the workforce in 2009 & 2010.

The Bottom Line on Tax Savings Of course, everyone’s financial circumstances and needs are unique, so it’s a good idea to carefully consider your choices and consult an experienced professional when appropriate. But remember, if you want to keep more of your money next year, now is the time to think about ways you can reduce Uncle Sam’s share of your income.

Charlotte Anderson, Anderson Tax & Bookkeeping – Now Open at 649 Cleveland Street, corner of East and Cleveland across from the Post Office in Downtown Clearwater! (727) 448-0004

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Read 1088 times Last modified on Thursday, 08 January 2009 17:52