Steps to take to help you save money on your taxes — before it is too late

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Our nation’s lawmakers are struggling with a budget deficit that’s almost impossible to comprehend. One option being considered is changing the tax code, but these changes may not be good for the average citizen. Most of the changes being considered will increase taxes for many of us.

The time to act to save yourself dollars may be now. There are still some things taxpayers can do before the end of this year to take advantage of the existing tax laws. Consult an experienced tax professional before making any decision or taking any actions.

Buying a home for the first time home buyer is still the number-one incentive tax incentivized government program. This program has just been improved with increased income limits for qualifiers. With the new law enacted in early November of this year, in order to qualify for a 10% credit of up to $8,000, single first-time buyers can have an income of up to $125,000 (the income was $80,000) and married couples up to $225,000. The first-time home buyer’s incentive is not just a tax credit but is a direct dollar refund. What this means is that you can get the full 10% amount in a refund even if you do not owe the amount of the credit in taxes. The program purchase price of a home is capped at $800,000. If the purchase price of the home is above $800,000, you get no credit at all.

Although the “Cash for Clunkers” program has ended, a lesser known incentive is still on the books that can save you a lot of money on your taxes. Buy a new car before January 1, 2010 and you can get a nice write-off on your taxes. If you buy a new car by the end of the year, you can deduct sales tax, excise tax, and certain other fees on a purchase price of up to $49,500. This deduction is a considerable deduction although not dollar-for-dollar like the home-buying incentive. There are income limits with this program. If your income is less than $125,000 for a single buyer or $250,000 for a couple, you may qualify for this program.

The next program the government has issued is a tax break for the unemployed. There is a $2400 exemption for this year for the unemployed. Unemployment income is taxable but you can write off the first $2400 of your unemployment benefits. Don’t forget though, you will still pay taxes on the rest, so plan accordingly.
A lot of tax incentives are still out there for the taking, but who knows how long they will last. The time to ask questions is right now. Before making any adjustments or trying to take advantage of any tax programs, you should always consult a tax professional.