Consider getting started now to save on 2009 taxes
— -- Today's topic: 10 things investors can do today to slash their 2008 taxes.
First: Start a deductible individual retirement account. Second: Fly back in time and harvest your capital losses. Third: Um, as long as you're back there, call yourself and see who answers. Fourth ...
OK, investors don't really have 10 ways to reduce their 2008 taxes, because with one exception — the deductible IRA — the clock ran out on Dec. 31.
Your best tax plan is to make sure you don't pay too much in 2009.
Let's start with the deductible IRA. You have until April 15 to contribute to your 2008 deductible IRA. You can then subtract your contribution from your 2008 income, which will reduce your taxes. You can contribute up to $5,000 for 2008; $6,000 if you are 50 or older.
Unfortunately, the odds are good that you can't deduct your IRA contribution. If you and your spouse have a retirement plan available through work, your income has to fall below certain limits to deduct your contribution. Joint filers who have a modified adjusted gross income of $85,000 can contribute the full amounts above. Your contribution limits shrink above $85,000 and vanish entirely at $105,000 of modified AGI.
Single filers who have a retirement plan available at work can make the full contribution to a deductible IRA, provided their modified AGI is $53,000 or less. The vanishing point: $63,000.
The rules on IRA deductibility are complex, and you can explore them in exquisite detail Here: Publication 590, Individual Retirement Arrangements (pdf).
If you sold any securities at a loss last year, don't forget to use those losses to reduce your taxes. You can use your capital losses to offset any amount of capital gains, if you're one of the three people on the planet who actually has capital gains. You can then deduct up to $3,000 in losses from your 2008 income. If you still have losses left over, you can use them in your 2009 taxes.
That's pretty much all investors can do now to reduce their 2008 taxes. But if you start planning, you can make a significant dent in your 2009 taxes.
