Tax planning at the end of the year involves a few basic ideas:
- if you can, defer taxable income to the following year;
- if you can, accelerate tax deductions into this year by prepaying; and
- using up tax-free funds in flexible spending accounts.
It's also important to keep in mind that some tax-saving strategies can be put on hold to next year, while others need to be acted on this year. Here's decisions you can safely hold off on making until April 15th, 2010:
- Contributing to an traditional IRA, Roth IRA, SEP-IRA, solo 401(k), or Health Savings Account for 2009.
And by way of contrast, here's a sampling of deduction-decisions that are made only during the calendar year:
- Charity & church donations,
- Medical expenses (including FSA reimbursements),
- Deduction for sales tax paid on a new vehicle, and
- Deductions for business-related expenses.
i lost my job in 08 and lost my home to foreclosure. i had invested about 60,000 in the property with a large room adition, new roof and siding. iam now in a rental trying to get by on a lesser paying job. i had to cash out 15,000 from my 401k to servive until i found a job and now owe 3,000 in taxes as a result which iam struggling to pay back. what can i do as far as deductions go? can i claim any loss from losing my home and all the investment i put into it?
Joey Taylor, the amount you invested into the home would certainly adjust the basis of your home. However unfortunately unless this home was an investment property (i.e. rental property), the loss of your personal residence due to foreclosure doesn’t qualify you for any deduction despite the amount you put into it. In fact depending on if there was outstanding debt on your home mortgage, that is if the home is sold for less than what you borrowed to purchase it, at most you will be able to make use of the Mortgage Debt Relief Act to possibly exclude the cancelled amount of debt left over as taxable income. This information will be furnished to you via 1099-A and 1099-C.
Furthermore by withdrawing from your 401(k), it sounds to me like the amount taken out was subject to a 10% early withdrawal penalty. At most you should discuss with a tax advisor as to whether any of the amount taken out of your 401(k) was used for purposes that qualify for the 10% penalty exclusion.
Thought you might be interested \to know that the links to union dues and job-related education on the deductibles section were blocked by my virus software (BitDefendor) for “antiphishing.”