Tuesday, December 14, 2010

Chute N The Bull 12-13-10

Shopping, wrapping gifts and making travel arrangements may be on many people’s minds during this time of year. It is smart to also think about year-end tax saving strategies.

Fortunately those individuals who are looking for a tax break still have time to reduce their 2010 tax bill.

It’s always a good idea to make a year-end contribution to your IRA. Actually, you have until April 15, 2011, to make all of your 2010 contributions. If you don’t have an IRA, now is a great time to start one. Again, you’ll have until April 15 of next year to set one up and claim a 2010 tax deduction. Consumers also may want to consider extra payments at the end of the year into their 401(k), 403(b) or 457 plans.”

The end of the year also is a good time to make any planned charitable contributions, especially if you itemize on your tax return. Payments for any job-hunting expenses can also qualify as an itemized deduction.

If your property taxes are due in January, consider paying them before the end of the year to increase your Schedule A deductions. Homeowners may want to pay their January mortgage in late December in order to take an additional deduction for interest paid. Just make sure the payment is processed before the end of the year so the interest amount gets reported on your 1098 form.

Many Texas teachers spend money out of their own pockets to purchase learning materials for their classrooms. These teachers, as well as principals and others who employed in a school, can take up to a $250 deduction on materials they purchase to make a learning experience better for the students.

The American Recovery and Reinvestment Act (ARRA), also referred to as the economic stimulus package, ends in 2010. AARA increased the beginning of the phase-out range for the credit for all married couples filing a joint return. It also provides a temporary increase in the EITC for taxpayers with three or more qualifying children. This means that these taxpayers may qualify for the maximum EITC of $5,657. What’s great is that this tax credit is refundable, which means that you’ll receive the full amount of the credit as a refund, even if you pay no taxes.

In addition, more families are eligible for the Additional Child Tax Credit because of a change in the way the credit is figured. The minimum earned income amount used to calculate the additional child tax credit has been reduced to $3,000. Without ARRA this minimum amount would have been $12,550. This is also a refundable tax credit.

Under ARRA, the Hope Credit was expanded and renamed the American Opportunity Credit. This credit allows parents with children in college to deduct up to $2,500 in college tuition and expenses for the first four years of post-secondary education.

Homeowners who have done home improvements can receive up to $1,500 in home energy tax credits. Upgrading windows and adding insulation fall under this category.

No one really likes to pay taxes, but taking some time now before the end of year to evaluate your options can save you some money when you file your taxes early next year.

You can find this and past articles on the web at www.mycountrytractor.com for your reference. Extension programs serve of all ages regardless of socioeconomic level, race, color, sex, religion, disability, or national origin. The Texas A&M University System, U.S. Department of Agriculture, and the County Commissioners Courts of Texas Cooperating.