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Tax Tips, Rates and Brackets for 2009 Returns

Posted by andyfvp on Dec 1st, 2008

With 2009 just around the corner, it is time for taxpayers to start taking some year-end actions with their finances to get the best outcome on their 2008 taxes. Thanks to the folks over at Turbo Tax, the leading online tax preparation and submission software, and my own experience here are some of the top tips to ensure you minimize your tax bill or maximize your refund. I have also included the latest 2009 tax rate brackets and changes released by the Internal Revenue Service for reference.

1. Sell losing investments - With most investors seeing red across their portfolio’s this year, selling a few loser stocks for a net capital loss is a good way to get a $3,000 (or $1500 for single filers) offset against other sources of gain or income. The one silver lining from all the capital (stock) losses investors have suffered this year, is that they can carry unused capital losses forward for as long as they live. This means you can recoup some of those losses against future capital gains and tax returns.

2. Donate to Charity - Donating clothes, toys, household goods and other items to charity before Dec. 31 may help taxpayers who itemize claim bigger refunds while helping someone else. Using tax return software like Turbo Tax helps taxpayers accurately value donations in accordance with IRS guidelines so there’s no need to guess at an item’s fair market value.

3. Prepay some bills: Taxpayers can prepay a few of their 2009 bills in 2008, and get to write them off on this year’s tax return. This includes mortgage payments and predictable medical expenses, like braces for the kids.

4. Maximize your 401k contributions: Increasing contributions to an employer-sponsored retirement plan not only gives taxpayers a boost for the future, it save taxes by lowering their taxable income. And that could help taxpayers take some other deductions based on their taxable income.

5. Second Chance Rebates - Some taxpayers who did not qualify for an economic stimulus payment in 2007 are getting a second chance. Taxpayers may be eligible for a second-chance rebate if they:

- Filed a 2007 tax return, but didn’t qualify for a rebate, or qualified for less than the full amount due to their income, dependents or filing status.
- Had a financial or other life change in 2008 (got married, had a baby, increased or decreased income) that would qualify them for a rebate

6. Deduct job search expenses: Taxpayers who are unemployed or just looking to change jobs can deduct their job search expenses. The rules, however, require that their job search be in the same line of work they are currently in. Job search expenses can include travel, lodging, phone calls, resume preparation, and career counseling. These can be deducted even if they don’t get a job offer. However, if this is a first job, no job search expenses are deductible.

7. Tax relief for foreclosures: Recent legislation provides tax relief to people with a home loan that was reduced, restructured or foreclosed. Taxpayers that qualify may not have to pay taxes on the amount of debt that was forgiven by their bank.

8. Open or contribute to an IRA: Qualifying taxpayers have until April 15th 2009 to open or make contributions to an IRA or retirement account. Making a deductible contribution before the due date may help lower their tax bill.

9. New Homeowner credit: If you are buying a home for the first time, you could be eligible for the new homebuyer’s tax credit worth as much as $7,500, under The Housing Assistance Tax Act of 2008.
I will publish further tax tips over the next few months, so consider subscribing (for free) by RSS or email to get the latest articles.
2009 Tax Changes you can benefit from:

- Standard Deductions has been raised to $5,700 for singles and $11,400 for joint filers, an increase of $250 and $500 (from 2008) respectively to reflect inflation adjustments. This has also resulted in tax-bracket thresholds increased for each filing status.

- Gift Tax Exemption raised to $13,000 (up $1,000 from 2008)

- Personal and dependency exemption raised to $3,650, up $150 from 2008.

- 401(k) Contribution Limit raised to $16,500 (up $1,000 from 2008)

- Income Limit for Full Roth IRA Contributions: $105,000 single/$166,000 joint (up $4,000/$7,000 from 2008)

2009 Single Filing Status Tax Brackets:

Taxable Income Bracket	Tax Payable on Income
$0 and $8,350	10%
$8,350 and $33,950	15%; plus $835
$33,951 and $82,250	25%; plus $4,675
$82,251 and $171,550	28%; plus $16,750
$171,551 and $372,950	33%; plus $41,754
Over $372,951	35%; plus $108,216

2009 Married Filing Jointly Status Tax Brackets

Taxable Income Bracket	Tax Payable on Income
$0 and $16,700	10%
$16,700 and $67,900	15%; plus $1,670
$67,901 and $137,050	25%; plus $9,350
$137,051 and $208,850	28%; plus $$26,637
$208,850 and $372,950	33%; plus $46,741
Over $372,950	35%; plus $100,894