With all the year end fast approaching it’s time to give significant consideration to Tax Saving Strategies that could save you lots of money in income tax. Below are some of those strategies:
1 . Accelerate personal income into 2009 and 2010 if you are in the highest 35% tax bracket. The Obama administration and Congress will certainly allow the Bush tax cuts to lapse after this year resulting in an increase in the maximum tax rates to 39. 6%.
2 . You do not need to rush out and buy your first household in order to take advantage of the first time home buyer $8, 000 credit rating. Congress has extended this credit until March 2010 and beyond.
3. If you are an existing home buyer who is considering selling and buying another home in 2009, and you have lived in your home for several out of the last eight years, hold off buying your home right up until after november 2009. Congress is working on a costs that expands the home buyer credit beyond first time dwelling buyers, with a $6, 500 credit that will be effective following enactment of this new legislation, which is expected to be authorized in mid-November, 2009.
4. Consider buying a vehicle during the past year to take advantage of the sales tax deduction on purchases up to $49, 500 of the cost of the new vehicle (used vehicles are generally not eligible). If you don’t itemize, you can add the sales tax on the car to your standard deduction. If you do itemize and you deduct express income taxes, you can deduct the sales tax paid on the fresh vehicle, in addition to your other itemized deductions. This split starts to phase out for married individuals with fine-tuned gross income over $250, 000 and singles with changed gross income over $125, 000.
5. If you plan to convert an old-fashioned IRA to a Roth IRA, you may want to wait until 2010. The particular tax on 2010 conversion income can be deferred (put off) and spread out over two years (2011 and 2012). If you are in the maximum tax bracket (35%) you will not would like to spread out the tax over two years, as the Obama administration expects on increasing tax rates in 2011/2012 up to 39. 6%.
6. There is no required minimum distribution for last year from IRAs for individuals 70 1/2 and older. This implies you do not have to take any distributions from your IRAs in 2009 should you not need the money.
7. If your adjusted gross income exceeds $166, 900 you will lose itemized deductions to the tune regarding 1% of the excess over $166, 800. You cannot drop more than 80% of your total itemized deductions. This constraint goes away for 2010 only.
8. If you do not itemize you are permitted to an additional $1, 000 (married individuals) or $500 (singles) property tax deduction for property taxes paid in ’09.
9. Putting business assets in use by December 31st, 2009 can provide you with large tax write-offs. Bonus depreciation may be claimed for 2009, which allows a 50% write-off of your assets cost to be deducted up front. The other 50% could be deducted using regular depreciation. This rule applies for brand new assets with useful lives of 20 years or fewer.
10. Expensing a depreciable asset placed in service just before year-end, is allowed for up to $250, 000 of the associated with the assets in lieu of regular depreciation. This $250, 000 ceiling on expensing is reduced dollar for money once a business places over $800, 000 of property in service.
11. Placing a new heavy SUV (over 6th, 000 pounds) in service before year-end allows you to expense around $25, 000 plus you can also take a 50% bonus downgrading deduction on the remaining cost as well as regular depreciation around the cost in excess of the $25, 000 expensing and fifty percent bonus depreciation. As an example, purchasing a heavy new SUV regarding $50, 000 by year-end can get you a tax reduction in price of up to $40, 000 for the year.