Year-End Tax Tips for 2008
Before the ball drops, it's time to get your taxes in order with these tips.
Dec. 29, 2008 — -- Tax time is here again. Get out your calculators, organize your receipts and take note. Here are some last-minute tips to help you minimize the pain.
The bad news is that most investors are down big this year. The good news is that you can apply up to $3,000 of your losses to offset your taxable income AND carry forward any losses in excess of $3,000 for future tax years. Keep in mind, if your losses are in your 401k or IRA -- you cannot claim the $3,000 loss on your tax return. The credit is only available to you if you actually sold any of your investments.
There are three new provisions which could translate to a savings for homeowners. As you may recall, Congress passed a housing bailout bill this past July. If you recently purchased your home—within the last year—you may be eligible for a tax credit of up to $7,500. The credit was put in place to give new homeowners an extra helping hand with their mortgage.
Second, there is a new tax break for homeowners who do not itemize their taxes. This year, for the first time, individuals may claim a property tax deduction of up to $1,000 on top of their standard deduction.
Finally, for homeowners who have unfortunately had the balance of their mortgage reduced because of foreclosure or restructuring, will not have to pay any tax on the difference. In the past, any reduction would have been considered taxable income and would have resulted in the homeowner paying additional money to the IRS. All of these new provisions could not come at a better time for homeowners.
If you itemize your tax returns, today is an excellent time to pay your January 2008 mortgage payment. If you pay your mortgage by Dec. 31, you are able to deduct the interest this year. For example, let's assume you have a $150,000 mortgage at a 6 percent rate and pay $750 every month (in interest alone); you could save over $187 in 2007 by paying your mortgage now (assuming a 25 percent tax bracket). Simply stated, by paying your mortgage in advance, you are able to put the monthly interest payment directly toward your tax bill for 2007.
Related Stories
ABC News Live