Tax Loopholes For Honest Tax Payers - Ways to Save Tax Dollars
Special Tax Deduction on New Car Purchase in 2009
If you purchase a new passenger car in 2009, you may be able to deduct the state and local sales and excise taxes from that purchase on your 2009 tax return due in 2010.
To qualify for this deduction, the new vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010.
The deduction is limited to the state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home, or motorcycle.
The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.
This special deduction is available to taxpayers regardless of whether they itemize deductions on their tax return.
Saving on the Price of Giving
When calculating income during the 2009 tax season, make sure to include donations to charities or gifts extended to family members. During the 2009 tax year, an individual could give up to $13,000 to children or grandchildren without any gift tax (a couple could jointly give a gift of up to $26,000 tax-free). Any gift over that amount is subject to a gift tax, which is incurred by the giver, not the recipient.
Saving Capital Gains and Inheritance Tax
To take advantage of the current battered market, you can create a personal residence trust that transfers ownership of your home to your children but allows use of the home for the life of the trust, usually 10-20 years. Creating the trust now allows your inheritors to gain your property at the currently depressed values while you still retain the property as your residence. The home’s estate tax value is locked in at the beginning of the trust, taking advantage of the currently depressed housing market. If you live longer than the trust, the home is no longer in your estate.
Don’t let Unused Spending Accounts go to Waste
Flexible spending accounts are an enticing employer offer but do not roll over to the next tax year. Any money from 2008 that was left in an employer provided flexible spending account was forfeited on December 31. However, your employer may have been granted a two and a half month extension. In that case, check with your employer for more details and use the remainder of your benefits before they disappear.
Deduct Now and Pay Later
Deductions apply to more than the cash or debit purchases you made in 2009. You can also take deductions for the tax year in which you charged goods or services with a bank issued credit card even though you may pay for those charges after that tax year. This can be useful to small business owners or self-employed service providers that can claim depreciation on business property purchased on credit.
Long Term Asset Sales
There is a great benefit for low to middle income families that sold any type of asset during the 2009 tax year. For tax years 2008, 2009, and 2010 all profit from the sale of assets, owned for more than one year, plus dividends, are tax-free if you are in the 10% or 15% tax brackets. The 0% rate may no longer apply if you have over $32,550 in taxable income.
Convert Your IRA and Save
Consider converting your IRA to a Roth account if your IRA was negatively affected by the stock market dive. This may decrease your tax liability and save you from paying income tax on any future appreciation of your Roth IRA. If you act soon, the conversion may still be applicable to your 2009 tax return.
Tax Tips for 2009
Educate and Save
A great way to lower your taxable income is by donating to college savings plans for your children or grandchildren. Up to $60,000 may be sheltered from gift taxes. When your children or grandchildren finally go to college, payouts from the accounts that are used for tuition, fees, and books will be income tax-free.
Mileage Rates
There are mileage rate changes for 2009 and important new vehicle depreciation information.
More information about mileage rates
Find out about income the IRS cannot tax. Are you withholding too much tax from your paycheck?
More tax saving tips and loopholes