Tax tips in a down economy

February 16, 2009 6:45:07 AM PST
Mark Stuber, Vice President of Tax Resources for Jackson Hewitt, shares his tax tips. For many tax filers, this tax season may be unlike any other.

If you've lost your job, foreclosed on a home or tapped into your retirement accounts early, your tax return may be affected.

Joining us this morning with money-saving tax tips is Mark Stuber, Vice President of Tax Resources for Jackson Hewitt.

Tips for tax filers feeling the effects of down economy:

Mortgage Debt Forgiveness Relief:

Homeowners who experienced foreclosure on their primary home can exclude the cancelled debt amount from their taxable income.
The home must meet the following criteria:
* It must be the taxpayer's main residence
* The amount of debt forgiven cannot exceed $2,000,000
* The loan must have been used to buy, build or substantially improve the home.

Unemployment insurance

* Unemployment benefits are taxable on every federal income tax return and in most states
* Important to note that taxes are not automatically withheld from a benefit check. Taxpayer must specifically elect to have the taxes withheld.
* There are a number of tax deductions that may be available to those looking for a new job, including: travel expenses, cost of printing, mailing and creating a resume, expenses of a job placement agency, etc.

Self-employment

* Taxpayers who become self-employed as a contractor or a consultant have a whole host of deductions and credits to consider
* Deductions: business expenses, half of the self-employment tax paid, health insurance premiums, etc.
* Be aware of self-employment tax

Significant drop in income

* More taxpayers may qualify for credits like EITC or Additional Child Tax Credit due to drop in income
* Amount of medical expenses paid, including health insurance premiums, may be deductible if income is lower this year

Important Tax laws when filing a 2008 return:

*Economic Stimulus Payment and Economic Stimulus Recovery Rebate: Many taxpayers should have received their economic stimulus payment based on the taxpayer's 2008 return. Taxpayers that did not receive their full economic stimulus payment in 2008 may qualify for the remainder as a Recovery Rebate Credit on their 2008 tax returns.

* Mortgage Debt Forgiveness Relief Act:

Homeowners who experienced foreclosure on their primary home can exclude the cancelled debt amount from their taxable income.

*Additional Child Tax Credit: The Additional Child Tax Credit is a refundable credit. This year, the income threshold has been decreased to $8,500 from $12,050, allowing certain taxpayers to qualify for up to $533 more per child in a potential refund.

Other Changes affecting many taxpayers include:

- new deduction for property taxes for non itemizers, like seniors with no mortgage
- new first time home buyer credit
- new tax rate on capital gains for qualified taxpayers of zero percent
Alternative minimum tax patch for tax year 2008

For more information, visit www.jacksonhewitt.com.


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