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2008 tax tips for recession
Given the recession, you should try to take advantage of several tax benefits this tax season:
As always, speak to professionals before taking any actions.
Given the recession, you should try to take advantage of several tax benefits this tax season:
- Stock market losses: If you had losses more than you earned, you may claim as
much as $3,000 of net capital losses each year from your wages and ordinary
income. Note that if you are married and filing separately, you can claim only
$1,500. If you had losses more than $3,000, you can carry additional losses to
future to offset any future capital gains. Also, if you're in the 10-15% tax bracket,
you don’t have to pay taxes on long-term capital gains between 2008 through 2010.
Given the significant decline in the equity market during the ongoing recession,
many families are expected to take advantage of this rule this tax season.
- Tax on dividends: The general rule on dividend is that if you earn more than $10
annually from dividend investments, you need to report it. If the dividend returns are
more than $1,500, you need to file Schedule B, Interest and Dividend Income. Taxes
on dividend can be between 5-15% depending on which tax bracket you are in.
- First-time homebuyer credit: If you bought your first home between April, 2008
and July 2009, you may qualify for a first-time homebuyer credit. This provides a
benefit of up to 10% of the purchase price of the home, with a maximum of $7,500.
Of course, as usual with home-buyer credits, the credit is a 15-year interest-free
loan at $500 a year. As before, first-time homebuyers who put down less than 20%
can deduct private mortgage insurance, which is required for lower down payment
loans.
- Lost job: It is no secret that many have lost their jobs since the start of the
recession. As before, individuals can deduct job hunting expenses as long as it’s in
the same field. But note that only expenses that exceed 2% of your income can
qualify. Expenses may be for airfare, hotel costs, and rental cars (or if you use your
car you can deduct 50.5 cents per mile for the first 6-months of 2008, and 58.5
cents per mile for the second six-months of 2008).
- Unable to pay taxes: If you are unable to pay taxes, you still need to file tax return
and begin communication with IRS and try to resolve it through a payment plan.
As always, speak to professionals before taking any actions.
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