Taxes and more taxes
December 8th, 2008
Well, I just spent my Friday & Saturday of last week at an intensive 2-day tax update seminar. Believe it or not, the speakers are really good and even manage to make federal, CT, & NY updates interesting. But these meetings are not for the faint at heart!
At this time of year, many newspapers and magazines are running their annual “end of year tax planning” articles which can be helpful if you know what questions to ask. Here are a few tips you may not have heard that I will share with you:
1. If you are planning on improving the energy efficiency of your home with a big purchase such as a new boiler, insulation, etc., hold off until at least January if you want some of the stingy tax credit benefit the IRS is giving ($500 lifetime credit–I mean really. Replace 2 windows in your house and you are done.). The credit existed in 2007 and is being revived for 2009, but for some reason, purchases in 2008 are being left out.
2. Get those charitable donations in. Books to the library, clothing to Salvation Army or wherever you choose to donate your goods. The warm clothes will help the less fortunate this year and you’ll free up some space in your closets. And don’t forget your charitable driving mileage–14 cents/mile.
3. Consider refinancing your mortgage if possible. Okay, so this isn’t directly related to saving on your taxes, but it can save you money. Mortgage rates have dropped and lending has loosened up a bit so if you have an adjustable-rate mortgage (ARM) or a higher rate, give it a try. And call your current bank and see if they directly hold your mortgage and ask them for a “rate modification” if they do. This costs much less and is much less hassle than a refinance and is a great way to save if you can.
4. Take some of those capital losses. If you had gains (yes, some people actually had these earlier in the year) in 2008, try to offset them. If you have some losses, might as well use some of them.
5. If you are a first time home buyer, be aware of the pros & cons of the 1st time home buyer credit. This $7,500 credit looks rather attractive, but be aware it is not a complete government freebie. It is actually an interest-free loan from the IRS that you will pay back over a period of 15 years each year at tax time if you stay in your house. If you sell your home before the 15 years are up, you will have to pay back the balance in full when it sells.
If you are a CT or NY resident, feel free to contact me directly with questions. CT & NY aren’t playing well together these days, so if you work in one state and reside in the other, watch it if you work some days in the office and some from home. Both states may come knocking on your door for their share.
Copyright 2008-2009 Kristin Delfau, author of Turbo-Mom's Guide to Saving Money Without Wasting Time a womens' personal finance book, and Aji Publishing.
Tags: IRS, taxes
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