Money Saving Tax Tips

If you're looking to save a little money on your taxes this year, listen up; Stephanie AuWerter, Contributing Editor for SmartMoney.com, has some tips.

First, do your best to stop losing money by dumping any underperforming stocks in your portfolio. "Selling stocks or mutual fund shares at loss can be a very powerful tax strategy," says AuWerter. Use your losses to offset any realized capital gains that you have. If you don't have any, use them to offset up to $3,000.00 in income. Or, tack them on to next year's tax return. Even though you've lost money because of the market slump, you'll make up some of it in the end.

You may also want to consider increasing your retirement account contributions. "The more you contribute to a tax advantaged account this year, the smaller your 2009 tax bill is going to be," says AuWerter. If you have the ability to change your contributions at your whim, try to increase them before the end of the year. "You do still have a big enough window this year to get in some significant money," says AuWerter.

You can also save some money by cleaning out your closets and donating unwanted items to charity. "There are a couple of loopholes here," says AuWerter. "You need to itemize your taxes and... you need a receipt." You don't need to attach the receipt for small donations, but you will for larger items. Keep every receipt in a file, though, because you'll need proof of your donations if you're audited.

Another way to cut your tax bill is prepaying your January mortgage payment. "The idea here is that you'll get a tax break in 2009 rather than pushing it into 2010," says AuWerter. So, you'll be making 13 mortgage payments this year instead of 12. This increases your deductions for mortgage interest. "This is a smart move if you think you're going to be in the same tax bracket next year or a lower one," says AuWerter.

You can also get a tax break by purchasing a new car. "There is a one time tax break this year for folks who bought a car between February 17th of this year and December 31st," says AuWerter. This break allows you to deduct state and local taxes. While high earners won't qualify, most folks will. For more information, click here to visit the IRS' website.

To learn more about saving money on your 2009 tax return, click here to visit www.SmartMoney.com.
By Erin Petrun