April 15 is fast approaching – so make sure you squeeze every legal deduction from Uncle Sam. Thanks to the complicated U.S. tax code, there are lots of little-known and unusual deductions that many of us qualify for. Here are eight great ways to save on your 2008 tax bill. And remember to visit IRS 1040 Central for more help, forms, and information.
1. New home buyers in 2009 may qualify for a tax credit of $8,000, but in a special twist, they can speed the payoff by claiming the credit for this year’s purchase on 2008’s return – even if that means amending a 2008 return that has already been filed. The amended tax return will allow them to claim the homebuyer credit on the 2008 return without waiting until next year to claim it on the 2009 return. Please note this credit only applies to homes bought in 2009. There previously was a $7,500 tax credit offered for buying homes through last year, but that credit had to be eventually repaid; the new 2009 credit does not have to be repaid.
2. Filers who live in states that have high sales taxes and no (or low) income taxes can choose to deduct their sales taxes instead of income taxes, if they itemize. This break was slated to expire, but was extended in a law which passed in October.
3. If you own a home but don’t have enough deductions to itemize, there’s a new break for 2008. You may now add up to $500 in property tax to your overall standard deduction; couples filing jointly can add $1,000.
4. If you’re self-employed, you can contribute up to 20 percent of income from that job to a simplified employee pension (SEP) plan. You can even submit for an extension for filing and make the contribution for 2008 as late as Oct. 15.
5. Start a traditional IRA by April 15 – up to $5,000 if you’re 49 or younger or up to $6,000 if you’re 50 or older as of Dec. 31 – and you can deduct the contribution from your 2008 income tax return.
6. Deduct classroom supplies: Teachers in K-12 can deduct up to $250 in out-of-pocket spending for classroom supplies. This break had expired, but in a last-minute move, it was reinstated by Congress.
7. Don’t forget you can deduct mileage allowances for driving your personal car for charitable work, moving or medical appointments.
8. Check if you qualify to file for the 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.
You may be eligible if you are in one of the following categories:
-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.
You need to claim the recovery rebate credit on Form 1040, 1040A or 1040EZ. The instructions for these forms will show you which lines to use. Unlike the economic stimulus payment, the recovery rebate credit will be included in your tax refund for 2008 and will not be issued as a separate payment.
The Recovery Rebate Credit Calculator will help you figure the amount you should claim on your 2008 tax return.
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