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Janice France-Pettit: Important tax tips for the year ahead

Posted: February 22, 2010 5:00 p.m.
Updated: February 22, 2010 5:00 p.m.
"Nothing can be said to be certain except death and taxes." Despite Benjamin Franklin's drab depiction of taxation, the thought of filing your return should not be avoided or even feared.

If done correctly, the filing process may present new and often overlooked opportunities for maximizing your tax return.

The following tips, combined with careful tax and financial planning, may uncover money-saving options and strategies that could have a significant effect on your finances.

Plan and organize now
Thorough planning from the beginning can play a vital role in maximizing the completeness and accuracy of your tax return.

Maintain accurate records of your expenses and income, including large expenses and small business expenses, charitable donations and investment transactions.

In addition, double-check your IRS withholding status and confirm it is appropriate for your tax bracket. Also, keep all of your documents organized and anticipate which tax forms (i.e., W2, 1099 and 1098) you should expect in the mail.

Be smart on deductions
Taking advantage of all appropriate deductions may be a way to squeeze the most out of your return.

Typically, income taxes paid to your state or local government and any mortgage interest you paid are deductible.

Consider writing off both large and small charitable contributions as well as the sales tax paid on the purchase of a new vehicle.

Keep in mind that certain restrictions apply and generally contributions cannot exceed 50 percent of your adjusted gross income.

Leverage investments
Using the right investment strategy may provide additional advantages on your tax return. You may want to harvest your capital losses and use them to offset taxable capital gains.

Also, consider contributing the maximum amount to your 401(k) retirement plan as well as making contributions to your IRA as early as possible in the year.

This may allow you to defer the taxes you pay on your contributions and give the money more time to grow from compounding interest.

Use tax credits
This year's tax laws may provide financial opportunities.

One possibility allows first-time home buyers (those who did not own a home in the three years before the purchase) to receive up to an $8,000 credit.

Existing home buyers (those who continuously owned a home for at least five of the eight years before the purchase) may receive up to a $6,500 credit on the purchase of a home.

Note that you must have a signed contract by April 30, 2010, and close before July 1, 2010, and there may be restrictions for
marital status and income level.

In addition, a 30 percent tax credit (up to $1,500) is available from the purchase of energy-efficient home improvements.

Start preparing early and be sure to review all options with your financial adviser to help you get the most beneficial return from your taxes.

The foregoing article is intended to provide general information about filing tax returns and is not considered financial or tax advice from Union Bank. Please consult your financial or tax adviser.
Janice France-Pettit is a senior vice president and regional manager for Union Bank, overseeing the Simi Valley, San Fernando Valley and Antelope Valley regions. Her column reflects her own opinion and not necessarily that of The Signal.


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