Tax Time Reminders from Folio Investing
April 15. For many Americans, that's a day of dread as they contemplate preparing their tax returns. And given the complexity of the tax code, who can blame them? Fortunately, recent changes to the tax code may reduce their 2008 tax liability. The following are some reminders from Folio Investing to keep in mind when prepare 2008 taxes and starting to plan for 2009 taxes:
Vienna, VA (PRWEB) April 10, 2009 -- April 15. April 15. For many Americans, that's a day of dread as they contemplate preparing their tax returns. And given the complexity of the tax code, who can blame them? Fortunately, recent changes to the tax code may reduce their 2008 tax liability. The following are some reminders from Folio Investing to keep in mind when prepare 2008 taxes and starting to plan for 2009 taxes:
Fund Your IRA
It's not too late to open and contribute to an IRA for the 2008 tax year as long as that is done by April 15, 2009. However, to fund an IRA one must have earned income during 2008. Folio Investing customers on the Unlimited Plan may open and invest in an additional IRA account at no additional charge.
For those who were under 50 years of age at the end of 2008, the maximum contribution to a traditional or Roth IRA is the smaller of $5,000 or the amount of taxable compensation for 2008. This limit can be split between a traditional and a Roth IRA but the combined limit is $5,000. For those 50 years of age or older before 2009, the same rules apply, except that the limits increase from $5,000 to $6,000.
Traditional IRAs: For those who participated in an employer-sponsored pension plan, the 2008 deduction is phased out between $53,000 and $63,000 of adjusted gross income for single filers, and between $85,000 and $105,000 of adjusted gross income for married filing jointly. If the taxpayer and spouse both work, the income limits are different for each. One can still make a non-deductible contribution, however, which will allow assets to grow tax-deferred until withdrawal. For those not covered by an employee pension plan, there is no phase-out of the IRA deduction based on adjusted gross income and contributions can be deducted up to the maximum for the taxpayer's age group.
Roth IRAs: In 2008, single filers' ability to contribute begins to phase out at $101,000 of adjusted gross income. No contribution to a Roth IRA is permitted once adjusted gross income reaches $116,000.
For married filing jointly, ability to contribute to a Roth IRA begins to phase out at $159,000 of adjusted gross income. No contribution to a Roth IRA is permitted once adjusted gross income reaches $169,000.
Details for both traditional and Roth IRAs are available from IRS Publication 590.
Claim the First-Time Homebuyer Tax Credit
One may be eligible if he or she has not owned a primary residence during the past three years; the tax credit is not available on purchases of vacation or rental properties.
Unlike the old first-time homebuyer tax credit, the newly expanded credit of $8,000 does not have to be repaid. The credit is fully refundable and may be applied against 2008 or 2009 taxes in the amount of 10% of purchase price up to $8,000, or $4,000 for married individuals filing separately. The credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000 or $150,000 for joint filers. Credit for home sales closing after April 15 may be claimed on 2008 taxes by filing for an extension, or by amending the return. Details are available from IRS News Release 2009-27.
Manage Your Required Minimum Distributions
Good news for those who are at least 70½ and facing required minimum distributions (RMDs) from a traditional IRA or other defined contribution plan: Congress has suspended this provision for 2009. The old rule still applies for 2008 distributions, even when made during the 2009 calendar year. Details are available from the IRS website and IRS Publication 590.
Review Your Qualified Charitable Distributions
Those over 70½ may make qualified charitable distributions up to a total of $100,000 directly from a traditional or Roth IRA to charity and have the contributions excluded from gross income. This provision only applies to 2008 and 2009 taxes and may be counted toward any applicable RMDs. Details are available from IRS Publication 590.
Obtain Disaster-Related Tax Relief
Tax relief may be available for residents of portions of Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska and Wisconsin who were affected by severe weather between May 19, 2008 and August 1, 2008. Details are available from IRS publication 4492-B.
Plan Your Estate
Both the generation-skipping transfer tax and the federal estate tax exemption (or credit equivalent) increased on January 1, 2009 from $2 million per person to $3.5 million. The gift tax exemption remains unchanged at $1 million. The annual gift tax exclusion has increased to $13,000 annually or $26,000 for spouses splitting gifts, and may apply to an unlimited number of recipients. Medical expenses and tuition gifts remain unlimited when paid directly to the service provider. Details are available from IRS Publication 590.
Deduct Your State and Local Sales Taxes
The deduction for state and local sales taxes has been renewed for 2008 and 2009. It can be claimed on Form 1040 Schedule A, Line 5. Details are available from IRS Publication 17.
Know Your Alternative Minimum Tax Exemption
The 2008 alternative minimum tax (AMT) exemption is $69,950 for married filing jointly, $34,975 for married filing separately, and $46,200 for single filers and heads of household. Details are available from IRS Tax Topic 556.
For More Information
Be sure to check with a tax professional for specific advice. Preparing taxes can be a headache under the best of circumstances. Folio Investing provides convenient tax management tools and may help reduce investment costs, trading commissions, and capital gains taxes. Learn more about these and other ways we can help by visiting us online at folioinvesting.com.
About Us
FOLIOfn, Inc., was voted "Best of the Web for Alternative Investing" by Forbes.com. The patented Folio Investing platform enables investors to create their own Folios - much like creating a personalized ETF or mutual fund. Folios can provide significant tax advantages, the ability to customize investments, transparency, and lower costs, while allowing for proper diversification. Investors can also choose from over 100 Ready-To-Go (RTG) Folios representing different market indices, sectors, geographic locations, and asset classes. In addition, through the FOLIOfn website, investors can cost-effectively purchase investment vehicles such as mutual funds and ETFs. The FOLIOfn platform allows commission-free investing for a low monthly fee, as well as dollar-based and fractional share investing. Folios can be managed or unmanaged and are offered by FOLIOfn Investments, Inc., a registered broker dealer, and are not registered investment companies. We do not provide investment, tax, or legal advice. FOLIOfn Investments, Inc., is a member of FINRA/SIPC. For more information, please visit Folio Investing.
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