Welcome to Our Tax Tips Newsletter:

Continuing our effort to provide you with valuable, practical tax information, we will periodically update this page with useful income tax tips and income tax advice from the best sources -- information on issues that you commonly deal with. Be sure to check our newletter from time to time to stay on top on of the latest and most effective tax strategies.

TaxEdge will provide income tax tips that will help you save money when it’s time to file your tax returns. It’s a good idea to use a well planned strategy so that you aren’t surprised in April. Using TaxEdge Income Tax Preparation Software and keeping good records could mean the difference between paying a large chunk of money in April and receiving a big refund check. Use our income tax tips as part of your ongoing preparation.

New Tax Breaks Help to Minimize Your Tax Bill

With the current condition of our economy, you may be more concerned than ever about minimizing your income tax bill when it comes time to file returns again. Be sure you remain alert to the possibilities of reducing your tax bill by taking advantage of the tax credits authorized in the American Recovery and Reinvestment Act (the Recovery Act) earlier this year. It provides tax incentives for first-time homebuyers, new car purchasers, people making their homes more energy efficient, and parents and students paying for college. Take a look and see if you can use any of these tax reduction opportunities.

First-Time Homebuyer Credit. Taxpayers who haven't owned a principal residence during the past three years may be eligible to receive a credit of up to $8,000 if they purchase a home before December 1, 2009. The credit can be claimed immediately on an original or amended 2008 tax return or it can be claimed on a 2009 return due in 2010. Time is of the essence because of the November 30 deadline. Congress is debating whether to extend the deadline.

New Vehicle Purchase Incentive. Qualifying taxpayers can deduct the state and local sales and excise taxes paid on the purchase of new cars, light trucks, motor homes and motorcycles. The deduction per vehicle is limited to the tax on up to $49,500 of the purchase price of each qualifying vehicle.

Making Work Pay Credit. The $400 Making Work Pay Credit lowered employees' tax withholding rates this year, putting more money into the pockets of wage earners. Self-employed individuals can claim this credit when they file their 2009 return.

Tax Credit for First Four Years of College. The American Opportunity Credit helps pay part of the cost of the first four years of college for tax years 2009 and 2010. Eligible taxpayers may qualify for the maximum annual credit of $2,500 per student.

Computer Purchases Allowed for 529 Plans. The Recovery Act adds computer technology and equipment or Internet access and related services to the list of qualified higher education expenses that can be paid for by a qualified tuition program, commonly referred to as a 529 plan, for 2009 and 2010.

Energy-Efficient Home Improvements. The credit for energy-efficient improvements to homes increased for homeowners who add insulation, energy-efficient exterior windows, or energy-efficient heating or air conditioning systems to their homes. The credit is 30 percent of qualifying improvement costs up to $1,500 for 2009 and 2010.

For more details on these breaks, see the full story in Six Recovery Act Tax Incentives for Individuals.

Income Tax Tips from the 2010 Tax Guide

Keeping Automobile Records
If you want to deduct expenses for the use of a car for business or employment, for charitable work, or to get to medical appointments, you must keep mileage records of your driving for any of these tax-deductible purposes. In fact, the IRS specifically asks you on your tax return whether you have written evidence of your auto expenses and is likely to deny your deduction if you don't have them.   To learn more about your record-keeping obligations for use of your car, please read Keeping Automobile Records.

Computing Your Initial Basis
If you buy a home this year, you will want to properly track its cost basis right from the start. The starting point for your home's tax basis is the sales price and the charges you paid upon purchasing or building the home (special rules apply if you did not buy the home but acquired it by gift or other form of transfer). The key document you need for tax purposes is the HUD statement or other settlement document showing the related settlement costs.   To learn more about tracking your home's cost basis, go to Computing Your Initial Basis.

Business Income
If all or part of your gross income derives from business activity, you will have to account for your business income on your tax return. The starting point for computing your taxable income is, of course, your gross business receipts or sales. From this, you will subtract your cost of goods sold (if any) to arrive at your gross profit. Knowing exactly what is and isn't reportable business income, and the distinctions between various types of income that must be reported in different places on your tax return, will be beneficial at tax time.   For more information on how to compute business income, take a look at Business Income.

Add Your Other Taxes
You calculated your income tax after figuring your total income and subtracting the allowable adjustments, deductions and exemptions to arrive at your taxable income. So you think you're finished with your tax return? Think again! Now that you've calculated your income tax bill, you must add in any other taxes that you owe.   To learn about the other taxes that must be included on your income tax return, please review Add Your Other Taxes.

Tax News

American Opportunity Credit Helps Parents and Students Pay for College
Many parents and college students will be able to offset up to $2,500 of the cost of college in 2009 and 2010 by claiming the new American Opportunity Tax Credit. The credit is equal to 100 percent of the first $2,000 paid for qualified tuition and related expenses plus 25 percent of the next $2,000 paid for such expenses each year. Forty percent of the American Opportunity Tax Credit is refundable.    To learn more about the credit, please read American Opportunity Credit Helps Parents and Students Pay for College.

IRS Guidance Offered on Minimum Retirement Plan Distributions
IRS Notice 2009-82, issued on September 24, provides relief for people who have received a 2009 'required minimum distribution' from an IRA or 401(k) this year if they didn't want to have the distribution. Individuals generally have until the later of Nov. 30, 2009, or 60 days after the date the distribution was received, to roll over the distribution without any tax or penalty consequences.    To find out more of the details, read IRS Guidance Offered on Minimum Retirement Plan Distributions.

White House Weighing New Homebuyer Tax Credit Extension
The White House is looking seriously at proposals to extend the first-time homebuyer tax credit. While the first-time homebuyer credit does not expire until November 30, first-time homebuyers have little time left to find a suitable residence to qualify for the credit, as do sellers who hope to market their homes using the homebuyer credit as an incentive.   For more on efforts to extend the tax credit, read White House Weighing New Homebuyer Tax Credit Extension.

Health Care Reform October Update
As September draws to a close, we still await clear signals from Washington on the course of the health care debate. But some core concepts about the restructuring of our health care system, its impact on federal spending, and its impact on our pocketbooks consistently appear in the various committee proposals.   To see more about how the restructuring of our health care system could affect you and your finances, go to Health Care Reform October Update.