Sunday, December 13, 2009

Increase your Itemize Deductions

Pay bills now and increase your tax refund.

Itemized Deductions include the following:
  • Uninsured medical and dental expenses during the year,
  • Interest and taxes paid on your home,
  • Unreimbursed employee business expenses or other miscellaneous deductions,
  • Uninsured casualty or theft losses, and
  • Contributions to qualified charities.
If you know already you will be completing a Schedule A Itemized Deductions for 2009, here are some tax tips to increase next year's refund:

State and local income taxes
Mail your January estimated payment in December and you can claim a deduction for the payment this year, not in 2010. This applies to taxpayers who make estimated State and/or local tax payments directly. Note: you'll realize no benefit if you're subject to AMT.

Real Estate Taxes
Soon you will receive your 2010 Cuyahoga County property tax bill in December 2009 (you usually receive it around Christmas). Paying this bill in December will allow you to claim an additional deduction in 2009.

Mortgage Interest
Make your January 2010 home-mortgage payment before the end of this year and you will have an additional interest that will appear on your Form 1098. In the 25% bracket for 2010 on a $1,000 interest payment, that saves you an immediate $250 on April 15, 2011. By doing that each year, you have created an interest-free loan of that $250 every year until the loan is paid off.

Go to Church regularly?
Consider putting your typical January 2010 contribution in the collection plate in December so you can claim the deduction this year. You are going to church on Christmas Day aren't you?

Medical Expenses
If you're close to exceeding the threshold of 7.5% of adjusted gross income for medical expenses, you may want to get caught up and paid in full before the end of 2009.

As with most tax breaks, you have to spend money in order to earned the benefit. The above may seem like a lot of money to spend before the end of the year. Think about this: these are examples of bills and expenses that you will have to pay anyway. Why not receive the tax benefit now instead of waiting to file your tax return in 2011.

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