Maximize Your 2009 Deductions with Big Purchases
It may sound odd, but you can really clean up on your taxes by making big item purchases before the end of the year. Why? The host of tax breaks created this year.
The theme at the moment in personal finance is you have to spend to save. As odd as it may sounds, this really shouldn’t be a surprise. We live in a consumer driven economy and have been in a small bit of economic distress as you might of heard about. To get us out, the government is creating tons of incentives to motivate us to buy and recharge everything. While the merits of this approach are up for debate, it does create some serious tax advantages.
The new vehicle sales tax deduction is a write-off you want to really pay attention to. The federal government has created a tax benefit to motivate you, me and everyone to buy a car. If you do, you can deduct the sales tax you pay for the vehicle on your tax return. You don’t even have to itemize. You can just add it to your standard deduction. If you are considering buying a new car, truck, motorcycle or RV, now is a great time since this write-off expires December 31, 2009.
Given all the rumbling about climate change, the idea of going green might be something you feel very strong about…or not so much. Well, you really should when it comes to taxes. Why? The government is offering huge incentives for those who make their homes more energy efficient. You can claim tax credits for energy efficient water heaters, appliances, windows and door to name just a few. You want to look for Energy Star brands. Regardless, the tax credit is the equal of 30 percent of the cost up to $1,500.
At first glance, $1,500 might not seem like a lot. It is. Remember, we are talking about a tax credit, not a tax deduction. Tax credits are far more valuable because they are deducted directly from the tax you owe instead of the gross income. For example, let’s say I replace some windows, my water heater and a dishwasher with Energy Star products and qualify for the full $1,500 tax credit. I do my taxes and find out I owe $3,000. I can then apply the tax credit and reduce the cheque I have to write Uncle Sam from $3,000 down to $1,500.
As you can see, you can really maximize your 2009 deductions with big purchases, but you need to act quick. Most expire at the end of the year.