Watch your withholding.
Recently, the Obama administration passed a law to give workers more money in their paycheck. To make up for the lost withholdings, a “Pay To Work Credit” was put into effect. However, many pension holders will still have reduced withholding, but they will not receive the “Pay to Work Credit”. It is important that you tell your financial institution to change your withholding back to the original amount, or you may find yourself owing additional taxes this year.
No need for an RMD.
For 2009, you will not have to take the required minimum distribution on your IRA if you are over the age of 70 ½. This will allow IRA holders to recover some of their losses during the recession.
Don’t get “double taxed”.
If you receive social security, it is considered tax free unless you have income totaling over $25,000, or $32,000 if you are married filing joint (Note: these figures include half of your social security income). This is known as your base amount. If your base amount is between $25,000 and $34,000 ($32,000 and $44,000 if Married Filing Joint) up to 50% of your social security will be taxable. If your base amount is higher than $34,000 ($44,000 if married filing joint) up to 85% is taxable. So, before you decide to take extra money out from your IRA, you should contact one of our tax professionals for a free consultation. Click here to setup a free consultation.
Note: If you are married filing separate, your base amount is $0. Also, you could pay up to 85% on your social security.
Sell stock and pay NO TAX.
If you are in the 10% or 15% bracket, you can sell stock and pay no capital gains tax. You must have held the stock for more than a year to qualify. However, this will raise your other taxable income, which may raise the tax rate on your other income, and raise your taxability on your social security.
Don’t forget to take your sales tax deduction.
Most retirees do not need state income tax withheld on their pension and other income. Therefore, it would be advantageous for most seniors to take the sales tax deduction on the Schedule A. Don’t forget to add in big-ticket items such as automobiles, boats, and airplanes. These can add to your sales tax deduction.
To use the IRS sales tax deduction calculator, Click Here.
Get a little extra for paying your property taxes or buying a new car.
Even if you don’t itemize your deductions, you can write off up to $500 in property taxes ($1,000 if you are married filing joint). You can also write off the sales tax on a purchase of any new vehicle. Just simply add the amount to your standard deduction and be sure to check box 40b (See Below). You will also have to fill out Schedule L.
