Monday, March 8, 2010

Life for Less: As promised...let's talk taxes!

Last week we finally finished & mailed out our state taxes. By "we" I mean I finished our taxes & Matt took them to the post office. Marriage, it's a team effort. 

I'm secretly enjoying tax season this year. My days of churning & burning through tax returns are over, and this year, I got to just focus on ours! Instead of waiting until the last minute to rush through our returns, I took my time, did them by hand (gotta keep that brain sharp!), and had everything in the mail before March 1st.

I've found some great links to excellent taxpayer information & have listed those at the bottom of the post, however, I'm going to try to briefly hit some highlights for the 20somethings in 2 sentences or less. Ready for rapid fire tax tidbits? Here we go:

Teacher Classroom Expense Deduction: For all of my teacher friends out there, don't forget to deduct up to $250 ($500 for you married teachers) of qualified education expenses. Read the fine print on page 30 of the IRS's Form 1040 Instructions.

Student Loan Interest Deduction: Paid interest on those student loans? Deduct your student loan interest on page one of your federal return. Refer to Publication 970, page 41, to calculate your deduction.

Moving Expense Deduction: Did you move over 50 miles for a new job? (We did!) You can deduct the reasonable expenses of moving your household goods & personal effects & of traveling from your old home to your new home. See Form 3903.

Haiti Charitable Contributions: If you itemize your deductions on Schedule A (instead of taking the standard deduction), you may deduct certain cash contributions for Haiti relief on your 2009 return. Instead of waiting to file your 2010 tax return to take these deductions (which must have been made between 1/11/2010 & 3/1/2010), you can take them in 2009. See page 1 of the1040 Instructions for more info.

Making Work Pay Credit: I like how the IRS puts it: "It pays to work. You may be able to take this credit if you have earned income from work." Pay attention, working friends! If you have earned income in 2009, you may be able to take a credit of up to $400 ($800 for married couples). Note that if you received this credit through a reduction in your federal withholding, you still must file Schedule M to benefit! Read the instructions for the how-to.

Education Credits: There have been some changes to education credits. The American Opportunity Tax Credit replaced the Hope Scholarship Credit. You can now take this credit (up to $2500/student) for the first 4 years of undergrad (instead only the first 2 years). For those of us still in school or still financing school for someone that falls out of that category, you can still claim the Lifetime Learning Credit (up to $2k). Pub 970 is your source for all things education. Note that you can also take a deduction, subject to limitations, for tuition & fees but in my experience this is rarely more tax advantageous than taking a credit. Read the instructions & run the numbers.

First Time Homebuyer Credit: If you bought a house, I hope you've heard of this credit by now. If not, brush up on the incredible tax incentive in store! Enough said.

NC Credit for Charitable Contributions: Thank you, State of North Carolina. Despite your ridiculously high state income taxes (I've somehow managed to move to progressively higher tax states. Florida 0%. Illinois 3%. NC 6-7%!), you throw a bone to those of us who don't itemize for federal purposes & thus don't get any federal benefit for charitable contributions. If you live in NC, you claimed the standard deduction on your fed return, & you've made cash charitable contributions in 2009, you may be able to claim a tax credit for charitable contributions on your NC return. I won't bore you with the calculation, but I did want to bring it to your attention. The NC Instructions (page 14) go into more detail. Also, see page 12 of the instructions if you claimed an education credit on your federal return. You may be able to deduct your tuition for NC purposes.

Helpful Links:
Other Matters:
  • Haven't tackled your return yet? Leave it up to a professional. Visit your local CPA!
  • Sorry.... My anal retentive side is telling me this is necessary: Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, I inform you that any U.S. federal tax advice contained in this blog is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in this document.

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