Tax Bracket Changes
It may be lower than you think. The minimum income level for each tax bracket has been increased by at least 4%. So, if your income went up by less than 4% last year (for instance, you got less than a 4% raise, or received a higher raise later in the year), it’s possible that the new rules bump you down to a lower bracket. For instance, if you earned $82,000 in 2009, you were in the 28% bracket in 2008. But, now, you'd be in the 25% bracket.
Student Loan Deductions
If you earn $75,000 per year or less (or if you and your spouse earn a combined $150,000 or less and you're filing jointly), you can deduct at least some of your student loan interest.
The Benefit of Paying 2008 Taxes With a Credit Card
If you paid a convenience charge for doing so, you can claim that as a deduction on your 2009 taxes with the rest of your itemized deductions. If you pay your 2009 taxes with a credit card, you can deduct the convenience charge on your 2010 tax return.
The Deal for Buying a New Car
If you bought your car between February 16, 2009 and January 1, 2010, you can deduct the sales tax for up to $49,500 of the purchase price. Even if you don’t itemize deductions (like two-thirds of Americans), you can add the sales tax from the car purchase to your standard deduction.
Getting an Energy-Efficient Appliance
If you recently bought an Energy Star-rated appliance such as a refrigerator, freezer, or air conditioner, the economic stimulus package may entitle you to a tax credit. (Who knew it would trickle down to you?) The rules vary depending on your state, so find out the rules in your state.
The Joy of Being a Recent or Future (Before April 30, 2010) Homebuyer
You just may be entitled to a tax credit of up to $8,000 for homebuyers. This tax credit is intended for the purchase of a first home, but if you lived in your previous home for five of the last eight years, you can earn a tax credit of up to $6,500. Keep in mind that a tax credit is much better than a tax deduction because it’s money that goes directly toward your taxes or your tax refund.
Commuting Your Savings
No matter how you commute, your employer can help you pay the cost of it, tax-free. If you drive, your employer can pay for up to $230 per month in parking expenses, tax-exempt. If you use public transportation, you can receive a transit pass worth up to $230 a month, also tax-exempt. And, for the first time, if you ride a bike to work, your employer can reimburse up to $20 per month tax-free, for everything from bike maintenance and storage to actually buying the bike. This only applies to months where you ride your bike to work fairly often, and it can’t be combined with either of the other transportation benefits. Make sure to ask your employer about tax-free transportation benefits if you’re not already receiving them.
Caveat: Note that, like many tax benefits, many of these credits are reduced or eliminated if you make $125,000 or more per year, or if you and your spouse make $225,000 or more.
Now, stop reading and start filing!
*Savings if you receive a tax credit for being a first-time homebuyer.
**If you are 25 today and retire at age 65. We calculated that number here.