10 Ways to Lower Your 2009 Taxes

With less than two months left in the year, it’s time to start considering year-end money moves to reduce your 2009 tax burden. To help spur some ideas, MSN Money has ten suggestions as follows:

Boost your 401k contributions
Make the most of your flexible spending account
Buy a house
Buy a car
Sell losing investments
Maximize your tax credits and deductions
Pay college bills
Give to a charity
Max out tax breaks for the self-employed
Keep track of medical expenses

Ok, we didn’t say they were ten good suggestions. Anytime you have to spend a few hundred thousand dollars (like to buy a house) to get an $8,000 tax credit, it’s probably not a good deal. Then again, if it’s a question of buying now or a few weeks from now, get a move on and save yourself eight grand!

To give them credit, there are several that make good sense — many people can benefit from boosting their 401k contributions, making the most of flexible spending accounts, selling losing investments (anyone out there have any?), and giving to a charity. Pretty basic ideas, but if nothing else, this piece reminds us that the year is ending soon and any appropriate tax-reducing measures we want to take need to happen quickly.

10 ways to lower your 2009 taxes now [MSN Money]

FREE MONEY FINANCE (Photo: The Consumerist)

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  1. arbitraryhandle says:

    Funny, I always thought consumerist endorsed increasingly massive governmental oversight and regulation. How do the editors believe this viable if we don’t pay increasingly more in confiscatory taxes?

    Love the consumer articles here but reducing tax payments while advocating for big government are diametrically opposed concepts.

  2. Loias supports harsher punishments against corporations says:

    Save $8,000 in taxes by spending $80,000 on a house. Sounds like a Walmart coupon to me.

    • secret_curse says:

      @Loias: My mortgage + taxes + insurance for the house I just bought is less than the rent I was paying at an apartment, so the $8,000 was definitely sweet for me.

      • sicknick says:

        @secret_curse: This is my plan for next year. I’ve got about 2K left on one Credit Card to pay off, and I’ll be debt free. Detroit suburbs I can get a 3 bedroom, basement, garage and sometimes a slightly larger lot for between 30-50K without even looking, depending on how much has already been updated to it.

        PITI is somewhere around 400-500 a month.

  3. Costner says:

    Hey they forgot the most obvious way to lower your taxes… make less money.

    That appears to be working for hundreds of thousands of Americans already, so clearly they know something I don’t. Who said there was nothing positive to come from being laid off?

  4. laserjobs says:

    The Housing Tax Credit will be extended until April 2010, it has already passed the Senate and most likely will be signed into law today. Not only that, it will be extended to couples making up to a quarter million a year and $6500 will be available for people who have lived in their house for 5 years or more.

    Dumbest tax credit in history, it will cost taxpayers around $100k for each additional house sold. It is basically a giveaway to the realtors and homebuilders. Trying to boost asset prices always fails and this will too.

  5. Harlan says:

    If the goal is to maximize disposable income, donating to charity won’t help. It just shifts where the money goes. The only reason donating to charity is better than paying the government is because you like charities more than things/people the government pays for (like soldiers and the elderly).

    The only ones that make sense are 401(k) contributions, since you’re paying your future self (instead of the government), and rescheduling purchases for one tax year versus another tax year.

    And “selling losing investments” is just another way to say “buy high, sell low”, which is stupid.

    • c_c says:

      @Harlan: flexible spending accounts makes sense too; you put money away pre-tax for medical expenses you would incur anyway, so you save 25-30% or whatever you total tax withholding might be on those expenses. You can save a lot if you are planning on having something like lasik.

  6. Riff Raff says:

    To clarify: The tax break for cars applies to new cars only, not used.

    It also wouldn’t amount to much. The final selling price must be under $49,500, and it’s a tax break, not a tax refund. You’re only getting back a portion of the taxes paid, not all of it.

  7. juggler314 says:

    I’m not sure exactly what they mean by “make the most of your FSA”. You decide your FSA elections at the end of the prior year and you can’t change them later in the year (to my knowledge). Thus your tax benefit is already set once you decide that.

    You do want to spend every penny in there if possible, but it wont change your tax burden.

  8. theblackdog says:

    Figures that this comes up right after my cousin E-mailed me about a condo in my area that just had the price drop. I would be all over it if I had the down payment towards a mortgage.

  9. Vicky says:

    The big tax decision for me around this time of year is how to structure my property tax payment. If I want to lower this year’s taxes, I’ll pay in full before January 1, though the due date is January 31.

  10. Doug Nelson says:

    Are computers deductable? I need a new video workstation, but I’m waiting for some upcoming technologies to hit (Q1 next year) before I buy. However, I could also use a deduction of that size (good video workstations are not cheap), so I might buy this year if I can deduct it.

    • Ihaveasmartpuppy says:

      @Doug Nelson: As a business expense, yes. As a personal expense, no.

      That’s just the rule in rough form.

      • Doug Nelson says:

        @Ihaveasmartpuppy: A friend tells me that you can deduct business computers, but the deduction has to be spread over several years. Any truth to that?

        • goodpete says:

          @Doug Nelson:

          As someone in the programming industry, I’ve heard this rumor about being able to deduct computer purchases on several occasions.

          Here’s an interesting article that explains why this is probably not worth it:

          [www.fool.com]

          It’s an older article (2004), but I don’t think that it’s lost all its relevance. You might be able to find more by searching around the web.

        • Ihaveasmartpuppy says:

          @Doug Nelson: No, not necessarily. In many cases they can be deducted in whole the year they are purchased and put into use. It’s called “Section 179″, you’ll probably want to read up on it as there are a few rules to follow.

  11. catastrophegirl chooses not to fly says:

    Boost your 401k contributions – done

    Make the most of your flexible spending account – all gone already, need to put more in for 2010

    Buy a house – done

    Buy a car -2008, oops

    Sell losing investments – done

    Maximize your tax credits and deductions – definitely will be doing that

    Pay college bills – n/a

    Give to a charity – done x2

    Max out tax breaks for the self-employed – i am so glad i am not sekf employed because i couldn’t afford my own insurance!

    Keep track of medical expenses – man, they get their own expanding file folder. and spreadsheet. unfortunately, my insurance is good enough that my medical expenses are just under the required 7% for deductability

  12. Mr.Duke says:

    I always laugh at the “how to pay less in taxes” stories. I want to pay lots of taxes. Why? It means I made lots more money. I would love to write the IRS a giant check. .. How do you pay less in taxes. … Easy. Make less money.

  13. korybing says:

    Is it worth the money to hire a personal tax guy? I made a nice chunk of money through freelance this year, and I bought a new computer, new tablet, new printer, all for my freelancing, but I also have a day job. That seems like a confusing configuration of tax crap that I’d have to wade through, but I’ve never had someone else do my taxes before, and I’ve heard horror stories about chain Tax places. Anyone have any suggestions?

  14. Scoobatz says:

    #11 – Induce pregnancy before 12/31.

  15. duetoprivacy says:

    I am a recent college graduate and will start paying back my student loans this month. How do I take advantage of the credit for college expenses?

  16. Buckus says:

    This one goes to 11: Make Less Money

  17. icntdrv says:

    Bought the house

    Started contributing to 401k

    but Medical expenses? Can I deduct dental work if I have to pay out of pocket?

  18. frank64 says:

    @floraposte: As long as you aren’t a corporation! Or rich.

  19. Tzepish says:

    @floraposte: You put it more charitably than I would. I would have said “there’s no contradiction between supporting consumer rights and supporting consumer rights.”

    I’m not sure I 100% understand the need that so many people have to categorize absolutely everything into two diametrically opposed sides. There’s no politics going on here, just as there isn’t in 99% of life.

  20. ColoradoShark says:

    @pecan 3.14159265: It’s worth it. Because it is pretax money, if you put in 10%, your paycheck only goes down something like 7% depending on how much you make.

    If your company has a matching program, (rudeness alert!) you are a fool to not contribute enough to suck up all that free money. If you complain you can’t afford to contribute the 2 to 5% required to get the match, then you are living beyond your means and have bigger trouble. People who have had some medical issue/tragedy etc. excepted from that micro-diatribe.

  21. harvey_birdman says:

    @Costner: :FACE!:

  22. h3llc4t, breaker of office dress codes says:

    @ColoradoShark: 401K plans are awesome. I started mine when I was first hired here almost 3 years ago. I never noticed the money being gone from my paycheck because I never had it to spend in the first place- that will probably be the hardest part of setting it up. I absolutely agree with you on using matching programs. We get 100% matching on the first 3% and 50% matching on the next 3. It’s pretty awesome to see that balance shoot up.

  23. ColoradoShark says:

    @Harry Manback: Wow, Never heard of a company that generous before. That’s the problem with broad sweeping statements in general, there is always some extreme point that is not covered. I’m not sure what I’d do in your case.

    I’m currently with a company that matches up to 4% which translates into about a 3% reduction in my paycheck. Everyone ought to be able to handle that!

  24. arbitraryhandle says:

    @Mary Marsala with Fries:

    Actually, it seems the only appropriate response here is your continued deference to the powers that be. Now shut up and pay more in taxes.

  25. henneko says:

    @arbitraryhandle: We’ll do it your way when share holders quit crying “limited liability!” to mommy gubmint when the company they own and control kills someone.

  26. Megladon says:

    @Oranges w/ Cheese wants it to be winter already:

    Little known point there, lose etrade, they will fee you to death and in only 8 short weeks give you money that is already yours.

  27. hotdogsunrise says:

    @pot_roast: Unless they are those crazy house flippers that live in the house as their primary residence for three years, they will have to pay the credit back. Yay, recapture!

    You know what I spent my money on? A new furnace/air conditioning unit. So, I re-invested this money into my community.

  28. SonicPhoenix says:

    @pot_roast: To my knowledge most flippers don’t hang on to a piece of property for 3 years and still expect a profit. There’s a provision in the bill where if you sell or move before three years is up you have to give back the $8000.

  29. Oranges w/ Cheese says:

    @Megladon: Pretty much what happened. They dumped what remained of my stock to recover fees. Needless to say I brought it to their attention and withdrew any remaining funds. I just have my account there now to ensure I get my tax documents in january.

  30. mrgenius says:

    @Oranges w/ Cheese wants it to be winter already: They have to issue 1099’s by Jan 31 whether or not your account is closed. And they are required to keep at least quarterly account statments on file for six years. Just an FYI.