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If you haven’t really thought about your income taxes since last year, there are still a few money maneuvers you can make. Use these tips right now—and keep the new rules in mind for future returns:
Sock money away in that 401(k).
It’s not too late to contribute or to start an employer-sponsored 401(k). This is the only transaction you can make in 2008 that still applies to your 2007 tax return if done before April 15. The maximum pretax contribution is $15,500 for taxpayers under age 50 and an additional $5,000 for individuals 50 or older. An IRA contribution lessens adjusted gross income and will lower your 2007 taxable income.
Hit the books.
Are you taking a full course load on top of working a nine-to-five? Don’t pay for it alone. Single taxpayers who earn less than $65,000 can deduct as much as $4,000 in such expenses as tuition and course fees (books are not deductible). Although the deduction for higher education expenses was set to expire last year, its popularity among taxpayers received so much buzz that Congress extended the tax break another year.
Deduct the cost of day camp.
If you send the kids to the Y this summer, here’s good news for 2009: Day camp expenses for a child under 13 are now eligible for the child- and dependent-care credit. The credit, which is better than a deduction because it reduces your tax bill, dollar for dollar, lets filers claim from 20 to 35 percent of child-care expenses, up to $3,000 a year for one child or $6,000 for two or more. Earn less than $15,000 and you can claim 35 percent. Make more than $43,000 and your limit is 20 percent.
Gather those envelope stubs from church.
Tithing may be between you and God, but now Uncle Sam needs proof. Starting this tax year, the IRS requires a receipt or bank record to claim contributions to a church. “If you went to church every Sunday and put $20 cash in the collection plate, it will be almost impossible to substantiate,” says Donny Woods, secretary–treasurer, National Society of Accountants. If you donate cash, use a church envelope so that you can request a receipt if necessary.
Prepay next year’s property taxes.
That’s right: We’re talking about paying your 2009 taxes this December. The extra installment allows you to claim two write-offs in the same calendar year. So if you’re banking on a nice check from Uncle Sam, use it to prepay those property taxes. Make sure you send the check early enough that it clears in time, but see a tax consultant first to find out if the deduction would benefit you, advises Ingrid Bachelor of Bachelor and Associates in Coral Springs, Florida.
Have these tax tips or others helped you? Share your experience below.
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