Okay, here are just a few IRS news items to keep in mind when filing your taxes:
Current Standard deductions are as follows:
Singles…………………………………………………………….$5,700
Qualifying Widow(er)……………………………………………..$11,400
Married Filing Separately………………………………………..$5,700
Head of Household……………………………………………….$8,400
Married Filing Jointly……………………………………………..$11,400
Blind or over 65 and married – add……………………………..$1,100
Blind or over 65 and single/head of household – add…………$1,400
Source: http://www.irs.gov/
The personal exemption amounts are:
- $3,650 in 2010
- $3,750 in 2011
- $3,850 in 2012
Tax tip #1 — Max it out!
Do you participate in a company 401(k) or a tax-deferred IRA? Contribute to these plans as much as your budget can afford. The 401(k) plan allows you to reduce your taxable income since contributions are deducted from your pay before taxes are withheld. Simply put, it reduces the amount of tax paid out of each of your paychecks. For 2010-2011, the pre-tax contribution limits are $16,500 for individuals under 50 years of age and there’s an additional catch up contribution of $5,500 for those over 50.
Tax tip #2 — Keep your balance!
Take time to review and balance your portfolio. If you have losses in your portfolio, consider selling them. Taking a loss offsets capital gains made in your other portfolio positions.
You can write off or claim your losses up to $3,000 or $1,500 is your married filing separately. And according to IRS.gov If your net capital loss is more than this limit, you can carry the loss forward to later years. All you have to do is Use the Capital Loss Carryover Worksheet available at IRS.gov.
Tax tip #3 — Make an adjustment!
If you received a large refund or had to pay a large tax bill last year, it means your federal income tax withholdings maybe too high or too low. Consider adjusting your withholdings to a level where you get to keep more of your money for yourself. To calculate your withholdings visit IRS.gov and search for the IRS Withholding Calculator.
Tax tip #4: Pay now, not later.
Happy New Year! Pay your January mortgage payment in the New Year on or before December 31st of the outgoing year: By doing so you take an additional deduction for interest paid; thus giving you one more month of interest to deduct.
Tax tip #5: Flex it!
Do you participate in a flexible spending plan from your employer? If so, you need to use it before the end of this year. Make that doctor or dental appointment now r purchase needed medical supplies that are covered under your plan. Do not lose your tax-free earnings.
Tax tip #6: Donate.
Do you have a favorite charity? Do you have a place of worship that you attend where you tithe? Do you itemize? Consider giving tax deductible donations to these organizations before December 31st.
When you receive your year-end tax receipts and file your taxes; itemize these donations. Donating now can help you receive a larger refund or smaller tax bill later.
Tax tip #7: Give a tax-free gift.
In general, to reduce your future estate taxes, consider gifting your children, grandchildren nieces or nephews a tax-free gift currently up to $13,000 per person. If you are married, both you and your spouse can separately give gifts valued at up to $13,000 or $26,000 to the same person without making a taxable gift.
Tax tip #8: Tax Credits.
Would you like to possibly see your tax bill reduced significantly? Then take advantage of tax credits. There are quite a few tax credits available. In some ways, tax credits are more valuable than tax deductions. Why? Tax deductions reduce your gross income, while tax credits are deducted from the final amount of tax you owe. For example, if you owe $6,000, claim a tax credit of $2,000 you end up paying $4,000 … a significant reduction.
Here’s a list of tax credits you should keep your eye for the 2010-2011 tax year … see if you qualify:
- Child Tax Credit
- The Child and Dependent Care Credit
- Nonbusiness Energy Property Credit
- Residential Energy Efficient Property Credit
- The Retirement Savings Contributions Credit
- The American opportunity credit
- Earned Income Tax Credit
- The Health Coverage Tax Credit
- The Health Coverage Tax Credit
