Next Month is Tax Time

It’s next month! Tax Time! Time to think about preparing your taxes. There are many changes this year. Getting an early start on tax preparation will allow you to learn about these changes and save yourself some money.

The changes are in three areas: expanded deductions, tax credits, and tax breaks.

New Deductions

The Standard Deduction: Standard deductions are up this year, $11,400 for married couples filing jointly and $5,700 for singles. If you are 65 or older or are blind, the standard deduction has also increased. You may also be able to increase your standard deduction if you spent money on state and/or local real estates taxes at $500 for singles and $1,000 for married, filing jointly.

Haiti Relief: If between January 11, 2010, and March 1, 2010, you have given to a Haiti relief effort, you may deduct it from your 2009 tax return. The donation must be cash and specified for victims of the earthquake; however, you can not take this deduction if you are taking the Standard Deduction. But, you can take this deduction next year if you do not take the Standard Deduction both years in a row. Be sure to keep cancelled checks or receipts with the amount and date of contribution.

New Car Purchase: You can take a deduction on some or all of your state/local excise and sales taxes if you purchased a new car, motor home, or motorcycle between February 16, 2009, and January 1, 2010. You can take this deduction whether or not you’re itemizing, but there are some income limits. Those in higher income brackets will not be able to take the full deduction.

Unemployment Compensation: If you collected unemployment, $2,400 is not taxable.

New Tax Credits

First-Time Home Buyer Credit: New home buyers can take an $8,000 credit; and if you close by June, 2010, you are still eligible to take the credit on your 2009 taxes. If you are buying a home but you already have owned a home for 5 consecutive years, you can also take a tax credit of $6,500.

Making Work Pay Credit: You can take a credit on your tax withholdings throughout the year. Singles who earn under $95,000 can take $400, and married couples filing jointly who earn under $190,000, can take $800.

Earned Income Credit: Lower income families with children should take advantage of the Earned Income Tax Credit. If you have 3+ children at home and earn less than $43,279 (single)/$48, 279 (married) or have 2 children at home and earn less than $40,295 (single)/ $45,295 (married) or have one child and earn less than $35,463 (single)/ $40, 463 (married), you can qualify.

Financial Market Losses: If in 2008 you lost money in the financial market, you can carry over the loss credit to 2009. If your losses were more than your gains, you can take $3,000 (married, filing separate) or $1,500 (single) off your earnings. If you have additional losses you can carry those over into 2010.

New Tax Breaks

Mileage: If you use your vehicle for business, your can take .55 on the mile. If you use your car for medical reasons, like going to and from the doctor’s, you can take .24 per mile. You can take .14 per mile for using your vehicle for charitable services.

College Credit: There is a refundable credit if you are paying for education, $2,500.

Energy Saving Home Improvement Credit: There is a $1,500 credit on new exterior windows, exterior doors, and new roofing that reduces heat gain. You can also take a 30% credit off the cost of solar, wind, or geothermal installations.

These are the highlights. You can find more details here.

For other tax saving ideas see Pennypinchinghints.com articles on the NUA Tax Breaks and PPH’s Tax Tips.

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