After looking at the IRS’ site, I included some common questions on taxes that people have.  I added my own commentary to some points that I found interesting. It’s always interesting to find out how the US tax system works.

2009 Standard Deductions Rise and Changes in Earned Income Credit

The new standard deduction is $11,400 for married couples filing a joint return (up $500), $5,700 for singles and married individuals filing separately (up $250) and $8,350 for heads of household (up $350).

Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $67,900, up from $65,100 in 2008.

The maximum amount of income you can earn and still get the credit has increased for 2008. You may be able to take the credit if:

  • You have more than one qualifying child and you earn less than $38,646 ($41,646 if married filing jointly),
  • You have one qualifying child and you earn less than $33,995 ($36,995 if married filing jointly), or
  • You do not have a qualifying child and you earn less than $12,880 ($15,880 if married filing jointly).

Investment income amount increased. The maximum amount of investment income you can have and still get the credit has increased to $2,950 for 2008.

Source: USA IRS

Use the Hope Credit or Lifetime Learning Credit to Save on Taxes

If you’re in college, take a look at the Hope Credit and the Lifetime Learning Credit. If you are in your first two years of college, you may qualify for the Hope Credit. Otherwise, look at the Lifetime Learning Credit for all other years (unlimited number of years). Keep your receipts for tuition and educational expenses. You cannot claim both credits in one year.

I couldn’t find the new adjustments for your gross income. In 2007, if your modified adjusted gross income was between $47,000 and $57,000 ($94,000 and $114,000 if you file a joint return), you should be able to qualify. We won’t be able to take this credit since I’m not a student anymore but I hope you guys can put this to good use.

Some Easy Ways to Lower Your Taxes

By looking at the IRS and other sites, I found some tips that can help reduce your tax burden.

  • Contribute the most you can to your retirement. You can contribute to your 401(k) and it isn’t taxed as income when you put deposit. Even with the bad market, you can still get some benefits.
  • Donate to worthy charities that fit with your goals. If you donate money, keep all receipts. If you donate items you can qualify for a deduction. If you drove for a charity there’s a small deduction you take.
  • If you moved for a job, see if you qualify for a deduction. It has to be more than 50 miles away and you stay at the job at least 39 weeks.
  • Deduct Student Loan Interest. Keep the paperwork to get a tax deduction.

Check out some other deductions you may be overlooking.

How much does a student have to make before he or she has to file an income tax return?

If you are an unmarried dependent, you must file a tax return if your earned and/or unearned income exceeds certain limits.

I included the IRS chart to see if you are required to file a tax return by looking at your income earned.

Table 1.2008 Filing Requirements Chart for Most Taxpayers

IF your filing status is… AND at the end of 2008 you were…* THEN file a return if your gross income was at least…**
single under 65 $8,950
65 or older $10,300
head of household under 65 $11,500
65 or older $12,850
married, filing jointly*** under 65 (both spouses) $17,900
65 or older (one spouse) $18,950
65 or older (both spouses) $20,000
married, filing separately any age $3,500

Source: IRS Publication 501

If you’re looking for a specific question, want to get some tax help, and want a reliable source, try the IRS’s website. There is a huge amount of information to search through. I also included some information from other personal finance sites that were helpful.

How do you plan for your taxes? What tips do you have to keep your money?
Photo Credit: NickStarr

Laura Martinez

Laura Martinez