In the next few weeks, employers all across the country will begin sending out 2007 W-2 forms so that we taxpayers can get our papers together and submit our annual tax returns.
As you await the arrival of your W-2, might I suggest spending a Saturday afternoon preparing for your meeting with your tax professional?
If you are a homeowner, you’ll need also to receive from your mortgage Lender your annual 1098 form indicating how much interest and taxes you paid throughout the year. For most of us, the mortgage interest and property taxes on our primary residences are seriously important tax deductible items. Often, these deductions can bring about a large refund for a homeowning family.
Homeowners should also bring to their tax pro any and all documentation to support any other potential tax deductions they may have the right to claim: charitable contributions, Union dues, unreimbursed employee expenses, proof of medical bills in excess of 2% of your adjusted gross income, and more. Bring as many items as you may feel are deductible; let your tax pro be the judge of what is feasible as a deduction, and what’s not. As a homeowner, you’re most likely filing a Schedule A for itemized deductions and that’s where the mortgage interest, property taxes and all those other deductions will be collected to provide a substantial reduction in your adjusted gross income—usually much larger than the standard deductions provided for by Uncle Sam.
I’d like to suggest this year that you Homeowners also consult with your tax professional about important tax-saving strategies for 2009. In the current state of the economy, we could all use a boost in our take-home pay or at least solid advice on how to save on your 2009 income taxes.
For instance, you can change your withholding at work and reduce the tax dollars deducted from your weekly paycheck, thus taking home more of your hard-earned dollars. Next year, you’ll get a lower refund, but, so what? That’s your money the government is returning to you—a loan you made, interest-free to Uncle Sam—not a windfall from the Treasury.
Your tax pro might also suggest refinancing your mortgage at what are right now the lowest interest rates since a man named Eisenhower was in the White House. Your tax professional will likely tell you to pay points not only to obtain the lowest possible rate, but also to obtain a further tax deduction over the next two years on your annual returns.
Homeowners, when you meet with your tax professional this year, go for the maximum deductions and discuss money-saving, tax-reducing strategies. It’s your money, it’s your home and you worked danged hard for both of them!
For those of you who are renting, I’d recommend similarly probing for the sage wisdom buried in your tax professional’s mind as to ways you can save money on your 2009 taxes. There are certainly things you can do now and throughout the year—contributions to an IRA and the like—that will invest your money for the future and lower your tax liability when you file your 2009 return next year.
I’d bet that for many renters your tax professional may look at your income, look at your lack of deductions and your inability to file a Schedule A for itemized deductions and make a radical suggestion: Buy a Home!
If ever there was a reason to ignore all the bad news about falling home prices, instability in the economy and the payroll of the New York Yankees, buying a home for the purpose of paying less income tax is as good a reason as you can find.
So, renters, get ready for a serious conversation with your tax professional this year. Then, ring me up to get prequalified for a mortgage. I’d be happy to oblige in your quest to pay less income tax next year. And, it would be my pleasure to help you make a dream come true: that of owning your own home!