Ah, tax season is upon us. We are all scrambling around for receipts and trying to get our taxes completed especially if we have refunds coming from the Federal government. Since we are all thinking about taxes, now is a good time to give some tips for getting a bigger refund for 2009 and 2010.
Jump on deductions. If your income and financial status allows you to file ‘long form’ (to take advantage of deductions) then the best advice is to comb through the deductions for 2008 to see if there are any that can be applied to you based on things you can or will be doing in 2009. These include: the new home buyer credit of $8,000 that does NOT have to be paid back, energy credits for making your house more energy efficient, purchasing certain hybrid vehicles and others.
Open an IRA. Tax deductible IRAs (Individual Retirement Accounts) allow you to take off the top what you contribute to your account towards retirement. The more you increase this, the more you will be able to use as a deduction. The maximum is: $5,000 or $6,000 if you are over the age of 60.
Increase withholdings. This almost is not worth mentioning because it requires you to increase the amount of federal tax withholdings from your weekly paycheck and give it to the government to keep until you file your taxes next year. Some of us have a problem with giving Uncle Sam more of our money to use on a tax-free basis and then returning it to us at a later time especially since you could take that same money and deposit it into a savings account and gain interest on it yourself. But, our goal here was to give you a way you could increase your tax refund next year and this certainly qualifies for that purpose.
Take advantage of tax changes. This can help you only if you are in a certain income range and perform certain things with your money. Let us take a look: Standard deductions increase from 2008 levels, exemption amounts go up, mileage deduction rates increase, Lifetime Learning and Hope credits for higher education increase, and finally, contribution limits on IRAs go up as well.
All of these might seem like much, but they add up quickly. Those who are diligent in finding ways to reduce their tax liability will do so with some success for 2009 and 2010. Make sure you consult with a tax expert before you file your taxes in order to insure compliance to existing tax laws.
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