Here are several year end tax tips that you should consider and a few things you may want to wait on until next year to optimize your tax deductions overall. I’m doing several of these, I hope you are too – and would love to hear what else you’re doing to snag any last minute tax deductions before the end of the year.
1. Mortgage Payment Timing – Make your January Mortgage Payment before Dec. 31 – While you can only start this cycle once in the first year you make 13 mortgage payments in a single year, 2009’s as good a year as any to start the cycle and pay your January payment before the end of the year. The extra payment’s associated interest amount will be tax deductible and you’ll get that money back come tax refund time in 2010.
2. FSA – Here’s a full description of how the Flex Spending Accounts work along with all eligible expenses. You can actually use an FSA for hundreds of things! Just make sure you max out your contributions or you lose ’em.
3. 529/IRA/401K – These appear on every list about tax deductions, I know. But it’s worth reminding you that you only have a couple weeks to make final contributions. In many states, you actually get a state tax deduction for contributing to a 529 plan for your childrens’ educational expenses. IRA provides for front or back-end benefits depending on whether you’re in a traditional or a Roth. But, either way, you have until Dec. 31 for the 529 and until April next year for the IRA. 401K investments come off your taxable income as long as you’re below limits. See #4 below on a “trick” to double dip on this.
4. FICA Tax “Bonus” – Did you exceed your FICA limit the last month or two? Instead of squandering those extra several hundred dollars coming in that you didn’t have in your cash inflow budget, why not temporarily up your 401K contribution further? This will not only reduce your taxable income further for 2009, but it will be an extra boost in your retirement account beyond what you would have done otherwise.
5. Buy a New Car! – You didn’t have to partake in the cash for clunkers program in order to realize a significant tax incentive to buy a new car. In 2009, even if you buy a larger vehicle that wouldn’t have qualified for cash for clunkers, there’s a new car sales tax deduction through the end of the year! Please, don’t buy a car for a tax break – you know this. But if you’re buying a car in the near future, you could save several thousand dollars in taxes by buying this year.
6. Sell your losers in your investment portfolio – You can deduct up to $3,000 per year in losses and even carry over losses in excess of that amount. If you were fortunate enough to have significant gains, make sure you don’t get burnt by the Wash Sale Rule by buying the same or equivalent investment again quickly.
7. Charitable Contributions (good ones!) – Use the charity navigator to make sure you’re not having your well-intentioned dollars slurped up by administrative expenses (or worse). That link has a nice description of how you can make sure you’re money is going where you want it to by working with the most efficient charities.
Wait Until 2010 for These!
1. If you can wait until the programs begin in 2010, you may actually want to wait until then to participate in the Cash for Appliances Program and the Cash for Caulkers Program .
2. It’s probably too late in the year to naively proclaim “Go buy a house”, but if you feel you missed out and you’re in the market for a home while you improve your credit score (see the only way to actually get your Free Credit Score) or save up for a down payment, take notice of this obscure government program that is giving out 0% down loans on conventional 30 year terms under the USDA Loan program.
Now that you’ve reviewed several different ways to achieve some additional tax deductions before year end, make sure you don’t squander that tax refund (some ideas on what to do with your windfall).
What Are Your Favorite Year End Tips?
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Wow, pretty good pieces of advice for preparing for taxes. Alas, I think the only one I could even think of taking advantage of is the charitable giving. Good stuff, good stuff.
Because I’m a fan of your work (and disdain plagiarism), I thought I would pass this along to you. You’d think the individual behind this would at least cite your site if they weren’t going to make an effort to mix things up a bit.
All links point back to your site – tsk tsk…
First group of related items point back to your site – tsk tsk…
(Editor’s Note: Link altered to prevent dirtbag scraper from getting his first link in to his site)…
BadBoys –
Thanks for dropping a line. I’ve been getting trackbacks from that idiot for months now – he basically steals every post and reposts it – so lazy that he leaves the links to my sites in the stolen posts! I’ve removed his link but I appreciate your effort in pointing this out.
May I ask how you actually landed on his site? As far as I can tell, Google already knows he’s a scraper and gives him no search traffic. Just curious if I should actually do something about it. To date, I’ve figured the loser gets no traffic and no impact to my work. He’s about one of 5 right now doing this.
Sure thing! I clicked on the “charity navigator” link and read through the article. Near the bottom, they have a featured links section. I noticed your headline and site attribution, and then this scammers site right after yours with the exact same text in the teaser.
I figured it had to be a traceback or something, so I clicked just to be sure. And then the anger started…
Oh, that makes sense. That charity navigator link is to another blog I follow – a legit one. When I linked to it, it generated a trackback there. I’ll shoot him a note to remove the next one – the dirtbag even has related posts at the bottom of my posts redirecting back to his own site!
Thanks again for your detective work and diligence on this one!
Confirmed via googling some keywords – looks like Google doesn’t even index him.
Thanks very much for those tax tips. I will be using them. Soon everyone will be taking cash advance payday loan to survice.
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