taxes

7 tax moves to make by year-end

3. Make extra home-related payments

Among those many home-related tax savings are itemized deductions for mortgage interest and property taxes. If you've got the cash to spare, you can make those payments a bit early and write them off on this year's taxes.

Unlike rent, which is paid in advance, your mortgage payment due Jan. 1 represents interest for the month of December. By making that payment a few days early, you'll get an additional amount to itemize on your 2009 Schedule A.

The same early payment plan applies to your real estate taxes. Homeowners typically get their property tax bills in the fall, but the due date isn't until next year. If, however, your local tax collector will take your payment -- or part of it if that's all you can swing -- sooner, pay it now to accelerate the tax benefits.

This approach works whether you itemize or include a portion of your property taxes in your standard deduction amount. The standard filer option, scheduled to expire at the end of the year, allows single homeowners to increase that set deduction amount by up to $500 or the amount of property taxes they pay this year, whichever figure is smaller. Married, joint filers can increase their standard amount by as much as $1,000.

4. Buy a car

Did you miss out on the Cash for Clunkers rebate program this summer? Don't despair. Some automotive tax breaks are still available.

Another new ARRA tax break is the deduction for sales taxes paid on a new car. If you bought a new car -- or light truck, motorcycle or even a motor home -- on Feb. 17 or later, you can deduct the sales tax amount.

Of course, says Laurie Asch, Senior Tax Analyst for the Tax & Accounting business of Thomson Reuters in New York, there are some other limitations on this tax break.

In addition to the purchase date, to get the full deduction the vehicle cannot cost more than $49,500. "If you buy a more expensive car, the tax on the amount over that price is not deductible," says Asch. The deduction also phases out for higher-income auto buyers, starting at $125,000 for single taxpayers and $250,000 for married joint filers.

But the deduction is available regardless of whether you itemize or take the standard deduction. Some other auto-related fees and taxes also can be claimed by auto buyers in states that do not have sales taxes. Decide soon, however. This deduction ends on Dec. 31.

The other major car-related tax break is the purchase or lease of a hybrid. This tax break will continue through 2010, but because of how it is structured, the size of the credit and just how long it will be available for certain makes and models phases out based on sales.

In fact, there are no longer any tax credits available for Toyota and Honda hybrids, and Ford's hybrid credits will end March 31, 2010. Full credit amounts are still available for qualifying GM, Nissan and Mazda hybrids. Check with your auto dealer and the IRS announcements on the various manufacturer credits.

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Can you take the hybrid credit and sales tax deduction on the same car? Sometimes the IRS frowns on what it sees as double dipping, but says Mark Luscombe, Principal Federal Tax Analyst for Riverwoods, Ill.-based CCH, "I can't find any reason why you couldn't."

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Our tax expert Kay Bell provides resourceful tips and advice to help you stay prepared for filing.

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