Year-End Tax Tips

December 17, 2009 8:58:45 AM PST
2009 has been had a lot to bear following the 2008 financial crisis. Many investors, including myself believe the worst is behind us. It is going to take a while for things to get back on track but we are headed in the right direction. The Dow has remained above 10000 for the past month which is a promising sign that the economy is improving. With only two weeks until the end of the year, it is important to take a moment to become familiar with the changes and updates to the 2009 tax season.

At work Now is the time of year to utilize the money in your flex spending account. You have put this tax-free money aside all year so do not let it go to waste. Stock up on medication you made need throughout the year or get a new or extra pair of glasses.

Also do not forget to check with your employer as this is the time of year they allow you to make changes to your 401k. If you can swing it, you should increase the amount you are contributing ? even if by only one or two percent. If you cannot increase what you are currently contributing, it is imperative that you are at least taking advantage of your employer's 401k matching program. This is free money! For those of you over 50, you can add an extra $5,500 to your 401k. $5,500 is a nice boost to your savings, so if this is an option for you, definitely go for it. But remember it needs to be done by the end of the year.

At home The tax credit for homebuyers was so successful earlier this year that it has been extended with some adjustments. Instead on an $8,000 credit for first time buyers, the new program offers a credit of 10% of the homes' value up to $6,500 but is no longer limited to first time buyers.

Another helpful hint for homeowners - If you are looking to make your home more energy efficient by updating windows, doors, insulation or water heaters, take advantage of the tax credits which equal to 30% of the cost up to $1500. More details can be found at www.energystar.gov

For the unemployed As of October the unemployment rate in Illinois was 11%. In order to accommodate this high number of people out of work, unemployment benefits have just been extended by an additional 20 weeks if you qualify. The first $2,400 you receive in unemployment benefits is tax exempt. In past years, unemployment income has been fully taxable. Also, you can deduct certain expenses related to your job hunt for example travel and transportation expenses, resume printing and mailing and phone calls. Check out www.irs.gov for details.

In the market Recently, people have been scared to either stay in the stock market or enter it for the first time. This is understandable given that the Dow hit 1997 levels this March. But it has been above 10,000 for over a month now which proves just how important it is to stay invested when the market is down and stocks are cheap. While the once in a lifetime deals are more rare, now is still an opportunistic time to re-enter the market.


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