Whether you are already retired or considering retirement in the near future, paying less money in taxes can be one more way to accumulate savings.
Steps to Take Now to Make April 15th Easier
Taking advantage of tax breaks may not be a favorite holiday pastime, but spending time to review last minute tax saving actions may be beneficial when you file your 2009 tax return.
AARP recently published an article with tax tips for working seniors and retirees, which may reduce 2009 tax bills.
Highlights from the article:
- Figure out if you must pay the alternative minimum tax (AMT) or find your marginal tax rate at www.IRS.gov. If you had to pay the AMT last year, which can kick in for some single taxpayers at $46,700, and at $70,950 for married taxpayers, you may have to pay it again on your 2009 income tax return. If that's the case, then your strategy should be to declare more income in 2009, or to delay deductions until 2010
- If you don't have to pay AMT, then it's best to defer as much income as possible and to contribute as much as you can to an IRA. You can contribute up to $5,000 to an IRA in 2009 and an additional $1,000 is allowed as a catch-up contribution if you are 50 or older
- Mandatory minimum IRA distributions were eliminated for 2009, but they return in 2010
- If you want to buy a car, motorcycle, light truck or motor home, buy it before 2009. By purchasing a vehicle before the end of 2009 you may be able to take advantage of a tax deduction on state and local taxes. The deduction kicks in even for those who don't itemize taxes (for single filers earning under $135,000, and under $260,000 for couples)
- Get a tax credit for up to 30% of the purchase price for energy-efficient items for your home
Reverse Mortgage Option
Homeowners over age 62 may want to consider getting quotes from reputable lenders for a reverse mortgage, which can help you pay a tax bill, fund energy-efficient home improvements, or buy a motor home for an on-the-road retirement lifestyle.
Michele Lerner is a freelance writer with twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance and business. Her clients include The Washington Times, Bankrate.com, Urban Land Magazine, NAREIT's Real Estate Portfolio and numerous Realtor association publications. Michele's first book, "HOMEBUYING: Tough Times, First Time, Any Time" is available now at Amazon.com. Michele has a B.A. and an M.A. in International Affairs from George Washington University in Washington, D.C.