Tax credit for 2008 only for people who did not receive the economic stimulus

The recovery rebate credit is a special federal tax credit for 2008 only. The credit is available for individuals who did not apply for the economic stimulate rebate in 2007. The recovery rebate credit is also available for people who’s rebate is higher when calculated using their 2008 financial information.

First Time Home Owners:

There’s a new, refundable tax credit of up to $7,500 for purchasing a primary residence. The credit is available to first-time homebuyers. The credit is available for homes purchased after April 9, 2008, and before July 1, 2009. And the credit will need to be repaid in equal installments over 15 years.

Additional Standard Deduction for Property Taxes

Homeowners can claim an additional standard deduction for property tax if they do not itemize. The additional amount is limited to $500 or $1,000 for joint filers. The amount is claimed as an additional amount on top of their standard deduction. The deduction is valid for the 2008 tax year only.

Boost Your Tax Deductions

1. Make an extra mortgage payment. The extra interest you pay will be added to this year’s mortgage interest by your lender, boosting your itemized deductions. You may want to confirm with your lender that your payment will be credited as paid in the current year.

2. Pay your property taxes. Real estate taxes are tax deductible. If your property tax bill is due early next year, you might want to pay it now and take the deduction.

3. Donate to charity. It pays to be charitable, especially at the end of the year. Donating cash is always a good idea. You can also donate household goods, clothing, and other items. Under the Pension Protection Act, you will need a written receipt for all charitable donations, and donated items must be in good or better condition. You can also deduct the cost of driving for charity at 14 cents per mile. You cannot take a deduction, however, for the value of your time or services when volunteering.

4. Pay doctor bills, insurance premiums, buy eyeglasses, or stock up on prescription medications. You can take a deduction for medical expenses exceeding 7.5% of your adjusted gross income.

5. Boost business expenses. Business owners and independent contractors can buy office supplies, invest in new equipment, or pay bonuses to their employees. They should also review their retirement plans or decide about setting up a retirement plan. Many retirement plans need to be established by the end of the year if owners want to make tax-deductible contributions for the year. You will want to review what constitutes a legitimate business expense just to make sure it will be tax-deductible.

6. Organize your financial records. Good record-keeping can really pay off at tax time. Not only will it make your tax preparation easier and faster, but you might uncover enough tax deductions to be able to itemize. More importantly, the IRS will require receipts and other records in the event of an audit. Entrepreneurs should be using accounting software such as Peachtree, QuickBooks, or Microsoft Office Accounting to ensure that all their income and expenses are recorded properly. Individual taxpayers may want to use Microsoft Money or Intuit’s Quicken to keep track of their personal spending. As an added bonus, these programs provide reports that summarize your tax deductions for faster tax preparation.

Manage Your Investments

7. Sell losing investments to offset capital gains,  Investors can lower their capital gains taxes by selling securities that have lost money. Losses offset gains dollar for dollar, and losses in excess of your gains can be deducted, up to $3,000 per year.

8. Wait to invest until after the ex-dividend date. Avoid buying mutual funds held in taxable accounts until after their ex-dividend date. You’ll avoid paying capital gains tax on the dividend.

9. Max out your retirement savings. Contributions to a retirement plan reduce your taxable income.

Tax Strategies Beyond Form 1040

10. Make the most of your Flexible Spending Account.

You should use up any funds in your Flexible Spending Accounts, or risk losing that money forever. Use your FSA funds to buy eyeglasses, medications, or get a checkup.