April 15th is right around the corner. If you haven’t filed yet, there may be a few ideas left in the Easter bunny basket to help you minimize your tax liability. According the Wall Street Journal (March 25, 2010), over 40% of all tax returns get filed between April 1st and April 15th. Remember, that we are almost 3 ½ months into 2010, so now is the time to start proactively planning your tax management strategies so you don’t come down to the wire when you file in 2011.
5 Last Minute Tax Strategies:
- The SEP IRA For Business Owners– For business owners, you can deduct contributions to a SEP IRA (through Oct. 15 with an extension). These contributions can be up to as much as $49,000 (source: www.irs.gov). If you have the cash flow and can lock the money up for the long term for retirement, this can be a great opportunity to minimize overall tax liability.
- Health Savings Account– You can take a 2009 deduction of up $5,950 per family ($3,000 single) to establish or contribute to a Health Savings Account if you have a qualified high-deductible health plan, if the contribution is made by April 15. (source: Wall Street Journal). Most individuals don’t realize that these plans are not use or lose such as the Flexible Spending Accounts you have at work. Whatever balanced is unused will carry forward into the following year. I have had a plan at Optum Bank (formerly Exante Bank), and the contributions up and above $2,000 can be invested according to the way that I choose much like a 401(k) plan.
- Deductible IRA– According to www.irs.gov, if you are covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. If you have no retirement plan at work, then you can qualify the deduction irrespective of the income limits on the tables below.
- Spousal IRA– If you have a married couple where one spouse participates to a 401(k) plan (or some qualified plan) at work, and have a non-working spouse you may still be able to get a tax-deductible contribution through a Spousal IRA. If the modified adjusted gross income is below $166,000 for 2009, the spouse could contribute and deduct up to $5,000 ($6,000 if over 50) to the Spousal IRA. (source: www.troweprice.com)
- On The Homefront– Home buyers got the biggest pop last year. Lawmakers extended the first-time home-buyer tax credit of $8,000 and, for purchases after Nov. 6, added a repeat home-buyer credit of $6,500. Qualified buyers who complete deals before July 1 of this year can claim these credits on either 2009 or 2010 returns. Decide carefully. “Because of income restrictions, sometimes a couple qualifies in one year but not the other,” notes IRS spokesman Eric Smith. The same form applies to either credit.
Home-fixers got a boost, too. For both 2009 and 2010, taxpayers can receive a tax credit of up to $1,500 for 30% of the cost of energy-efficient home improvements such as windows and heating or air conditioning units. A different credit allows 30% of the full cost of solar water heaters and wind turbines, among other items, and there are no income limits on either benefit.
One more, for nonitemizers: They are allowed to deduct an extra $1,000 of property taxes on 2009 returns.
These are a few to consider coming down the homestretch for filing.
Go to www.oxygenfinancial.net to get your guide to 10 most overlooked tax deductions.
Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder oXYGen Financial, Inc.
Request a FREE consultation: www.oxygenfinancial.net
oXYGen Financial, Inc. co-CEO Ted Jenkin is one of the foremost knowledgeable professionals in giving financial advice to the X and Y Generation.
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