ATLANTA — The tax filing season is just around the corner. “Taxpayers can take the first step now by planning and reviewing tax law changes featured on the IRS Web site, www.irs.gov”, according to IRS spokesman Mark Green.
Advance planning now could save taxpayers time – and perhaps even money – later. Several key points to consider:
• Charitable contributions — Make 2008 deductible charitable contributions no later than Dec. 31. If the taxpayer’s goal is a legitimate tax deduction, give to a qualified public charity; keep a paper trail and non-cash contributions should be in “good” condition. Donations charged to a credit card by Dec. 31 are deductible for 2008 even though the bill is paid in 2009. Taxpayers must be itemizing deductions in order to benefit.
• Contribute to a retirement account — The maximum 2008 IRA contribution is $6,000. The Retirement Savings Contribution Credit or “Saver’s Credit” of up to $2,000 is also available to taxpayers who contribute to a plan and whose income is generally less than $53,000. A Roth IRA conversion from a traditional IRA may also be a long-term tax saving solution. Many can deduct a traditional IRA contribution as well.
• Sell the losers — Consider a portfolio adjustment. Up to $3,000 can be deducted in capital losses each year.
• Tap IRA for charity — Taxpayers at least 70 1/2 years old can make a tax-free transfer of up to $100,000 directly from an IRA to a tax-exempt charity by Dec. 31, 2009, without paying any tax on the distribution.
• Save receipts and paperwork — Accurate recordkeeping is a must and also provides a good reminder.
Consider new laws
The Economic Stimulus Act has thus far provided 117 million households with more than $95 billion in economic stimulus payments. Eligible taxpayers will have a chance to claim the Recovery Rebate Credit in 2009 if they did not receive a stimulus payment in 2008. Factors determining eligibility include an income change, childbirth or having not filed in 2008. Businesses also benefitted through increased expensing and depreciation deduction rules for assets purchased and placed into service in 2008.
The Housing and Economic Recovery Act offers a first-time homebuyer credit of up to $7,500 and an additional standard deduction for state and local real property taxes for those who do not itemize deductions.
The Emergency Economic Stabilization Act includes several “extender” provisions that bring back many popular tax deductions and provides for 2008 Alternative Minimum Tax, or AMT relief to millions. Among the extenders:
• Qualified tuition and fees — extended through Dec. 31, 2009. Up to $4,000 can be deducted.
• State and local sales tax – extended through Dec. 31, 2009. Taxpayers can deduct either state income tax or sales tax.
• Teacher deduction – extended through Dec. 31, 2009. Educators can deduct up to $250 in out-of-pocket expenses.
• Energy credits —extends for eight years the credit for residential energy efficient property. Taxpayers may be able to take a credit of 30 percent of costs for qualified solar electric property, solar water heating property, and fuel cell property. Also, dozens of hybrid vehicle makes and models still offer tax credits for original buyers.
For more year-end information and to access IRS forms and publications, go to the IRS Web site at www.irs.gov.