Last Minute Tax Deductions and Credits 2008

last-minute-tax-deductions-2008

Remember last year when you told yourself that you wouldn’t wait till the last minute to do your taxes?  Well, April 15th is knocking on the door again, and now you find yourself in that all to familiar situation–  scrambling to get all your W-2′s and 1099′s in order.   On top of that, you’re searching trying to find every little deduction and credit you can squeeze out.  For those that are desperately seeking all the last little deductions they can muster, here’s a few that you might just be able take advantage of.

1.  Recovery Rebate Credit

The recovery rebate credit is a one-time benefit for people who didn’t receive the full economic stimulus payment last year and whose circumstances may have changed, making them eligible now for some or all of the unpaid portion.

To qualify for the credit, you have to meet some of these tests:

  • Individuals who did not receive an economic stimulus payment.
  • Those who received less than the maximum economic stimulus payment in 2008 — $600 per taxpayer; $1,200 if married filing jointly — because their qualifying or gross income was either too high or too low.
  • Families who gained an additional qualifying child in 2008.
  • Individuals who could be claimed as a dependent on someone else’s tax return in 2007, but who cannot be claimed as a dependent on another return in 2008.
  • Individuals who did not have a valid Social Security number in 2007 but who did receive one in 2008.

2.  IRA Contribution

Contribute to a Traditional IRA and you just accomplished a “two-for”  A what?  You just accomplished two things for the price one:

  • Added more to your retirement nest egg
  • Got a tax deduction to boot

To qualify for a deduction depends on whether you or your spouse is an active participant in a retirement plan at work (401k or pension) and your income limits.  For example, of you and your spouse both have a 401k, you are limited to $85,000 AGI and phased out completely at $105,00 meaning you don’t get a deduction at all.

If you don’t need the deduction you could always consider a Roth IRA.   Here are the contribution limits on the Roth IRA.

3.  Business Retirement Contributions

If you are a business owner, you have a few more options.   A few options that you have are either a Simple IRASep IRA or Solo 401k.   The number of employees, if you want to match, and how much you want to invest are just a few of the factors to consider on what plan you adopt.   Another plus which I’m taking advantage of this year since this my first year as a 1099 independent contractor, is that you can file a tax extension.  Basically, that means I have until my extension due date to contribute the funds for the year.  As a new business owner, I’ve had a few more moving parts to work with than ever before.

4. First Time Home Buyer’s Credit

Although the First Time Home Buyer’s Credit has increased for those that have bought a home since January 1st of this year, a lesser credit still exists for those that purchased on April 9, 2008 or later last year.   A couple of the key differences between the two:

  • The latest one is $500 more for an $8000 credit
  • The $8000 credit does not need to be repaid if you are in the house for at least 36 months
  • The $7500 credit has to be repaid over a 15 year period

As always, consult your tax professional to ensure that you qualify for any of these tax deduction strategies. Here’s a good resource if you think you may have to file a tax extension.  And my advice for 2009- Don’t wait till the last minute to do your taxes!

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