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Wittman: Changes to tax code cut you some slack

Not to be the bearer of bad news, but April 15 is, well, about 15 days away. That means you’ve got just two weeks to get your tax returns completed and filed.

As you’re preparing your taxes this year, there are some things to keep in mind that might help you save on your taxes – or at least reduce the amount you must pay – this year.

Congress approved some 500 changes to the 2008 tax code in response to the economic collapse. You may be entitled to more tax breaks than you previously thought.

For example, if you’re a first-time homebuyer and you bought said house after April 8, 2008, you can get a tax credit equal to 10 percent of the purchase price, up to $7,500. It’s actually a tax-free loan that you’ll pay back to the government over 15 years, beginning two years after the credit is claimed.

If you sell the home before you pay back the loan in full, you’ll be on the hook for the balance of the loan. Since it’s a tax credit, your tax bill is reduced dollar for dollar, which is a pretty sweet deal.

If you’ve experienced a foreclosure, there’s good news for you, too.

Usually when you sell your home for less than it’s worth (e.g., a lender-approved short sale) and your debt is reduced and/or cancelled, Uncle Sam considers the forgiven amount as taxable income.

But in 2007 Congress approved legislation that excludes up to $2 million of canceled debt if it is a principal residence.

Other deductions you should be aware of: deductions for teachers and educators to write off up to $250 for classroom expenses; deductions for qualified college expenses for taxpayers that earn too much to claim the Hope or Lifetime Learning tax credits; and, for unemployed folks looking for a job, you may be able to write off some of your job search costs, including headhunter fees, transportation expenses, etc.

Lastly, if you didn’t receive the full tax Recovery Rebate last year, you still have a chance to claim it under the Recovery Rebate Credit. The rebates were paid based on 2007 tax return information. So if your income dropped significantly in 2008, you may qualify for an additional credit.

Check out the following resources for more information:

The Internal Revenue Service at irs.gov; MSM Moneycentral at articles.moneycentral.msn.com/taxes/home.aspx, and, Kiplinger’s at kiplinger.com/features/archives/2009/02/how-to-get-stimulus-money.html.

Romi Carrell Wittman is a writer and the communication services director for Trico Electric Cooperative. E-mail: romi.wittman@comcast.net.

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