Tax Day 2008 – Time to Get Ready for 2009!

by James & Miel on April 15, 2009 · 0 comments

Hi All,

It’s tax day today.

If you are still working on your taxes you might consider going over to Jeff Schnepper’s article on commonly overlooked deductions (here). He’s got some some good ideas for savings money on your 1040.

If you have already completed and filed your taxes for this year, kudos to you! Now its time to start thinking about next year. For your 2009 planning, consider the following:

1) If you are a couple, and your modified adjusted gross income (AGI) is less than $85,000, or you are single and your AGI is less than $53,000 you can contribute to a deductible IRA. The limits for 2009 are $5,000. You should strongly consider this if you haven’t already. Every dollar you can put into a deductible IRA, depending on your tax rate, is pennies off your taxes. For example, if your tax rate is 15%, then every dollar you deduct is 15 cents fewer taxes. First off, the money you put in the IRA is an investment in your future wealht, and secondly every dollar you save on taxes is a dollar you can use to build your wealth. Don’t let this opportunity pass you by.

2) Bunching your medical expenses. The IRS allows you to deduct expenses greater than 7.5% of your adjust gross income. If you have a good handle on what you think your AGI will be, you might consider accelerating or deferring large medical expenses. So, for example you might be looking at paying medical insurance or getting dental work done. Depending on your AGI, you could consider paying earlier or later to take the deduction.

3) Consider accelerating some of your other deductions. A neat trick some people do is to prepay their mortgages by a month. So, in December you might consider paying for both your December check as well as for your January bill. This way you can deduct the interest from both months.

4) As always, maximize your 401k or 403b contributions. Every dollar that goes into these account is a dollar off your taxable income. You have the added benefit of putting your dollars to work for you in whatever investment fund your 401k/403b account offers. Don’t forget, for 2009 the contribution limits for these have increased to from $15,500 to $16,500. Again, same logic as #1 concerning the IRA. You can use the tax savings to build your wealth.

All of these can result in substantial tax savings, but they take some planning ahead. Now that your 2008 taxes are in, its a great time to start on 2009.

Tax planning can be fun and rewarding, especially if it result in less of a burden when April rolls around!

Best,

James

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