12 Ways to Lower Your Taxes for 2008 Before the Tax Year Ends
by www.SixWise.com
Tax season may seem like it's a million years away, but there are only a few more weeks to due the final trimmings on your 2008 tax bill. That is, by taking advantage of the following year-end tax tips, you could save big money on your tax bill come April 15.
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With a little forethought now, you can save yourself more than a pretty penny later.
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New for 2008: Tax Laws to be Aware Of
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First-time homebuyers can get a credit of up to $7,500
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If you pay real estate taxes and do not itemize, you may increase your standard deduction by up to $500 or $1,000 if married filing jointly.
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The Mortgage Forgiveness Debt Relief Act now allows you to exclude from income the debt forgiven when your home was foreclosed.
Money-Saving Tips to do Right Now
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Pay your January mortgage payment this month. By paying by December 31, you can include the interest deduction on your 2008 tax return.
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Make estimated state tax payments for fourth quarter. By doing so before December 31 you can take the deduction for your 2008 taxes.
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Make charitable donations. Any donations you make this year count for 2008 (even if they're processed in 2009). Remember that you must have a receipt, bank record or other record of your contribution from the agency for it to qualify. Items donated must also be in good condition for them to qualify for a deduction.
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If you have a lot of medical expenses, pre-paying may benefit you. If you know you're going to qualify to deduct your medical expenses (they must exceed 7.5 percent of your adjusted gross income), go ahead and pre-pay this year for whatever you can (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.
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Pay your January college tuition. If you'll be taking classes in the first quarter of 2009, you can prepay the tuition now and get a 2008 tax benefit from the Hope or Lifetime Learning credits.
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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.
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Max out your retirement plan contributions.
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If you're looking for a new car, consider an energy-saving vehicle. Both hybrid and alternative fuel vehicles qualify for tax credits if purchased in 2008.
- If you're self-employed, delay December billings until January. This will reduce your taxable income for 2008. Similarly, it may be in your best interest to ask your employer to delay a holiday bonus until 2009 as well.
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
Franchising.com November 21, 2008