Tax Tips for Individuals

Retirement: A great way to save for retirement and save on taxes is to put money in a 401(k), 403(b), IRA, or Roth IRA. For many people, a company sponsored 401(k) will be the preferred choice because the money goes in tax free and many companies contribute matching funds.

Selling Your Home: When you sell your primary residence that you have lived in and owned for two of the last five years, you can get a tax exemption for $250,000 (single) or $500,000 (married) of the capital gain.  If you have more gain, be sure to add the cost of any major improvements when calculating the cost of your home.  For example, add the cost of any kitchen or bathroom remodels or major landscaping projects. Minor repair work to your home should not be added to the cost.

Non-Reimbursed Work Expenses: If you have work-related expenses that are not reimbursed by your employer, you can add them to your itemized deductions. For example, you can deduct a portion of your expenses for car mileage, travel, and work lunches.  You need to keep receipts and travel logs for documentation.

Capital Gains and Losses: For the best tax benefit, consider timing large gains with losses to offset your capital gains tax. If a stock you own is down considerably, consider buying more of it, waiting 31 days, and selling the lot with the loss. This way, you can use the loss to offset gains (and still own the stock).

Hybrid Cars :Hybrid vehicles do not qualify for the electric vehicle credit. That is because they are not powered primarily by electric motors. So what kind of tax break is available? This type of car may be eligible for a clean-fuel deduction.

Generally, the deduction is limited to the cost of the electric components of the automobile. The taxpayer must be the original owner of the car and the car must be intended for his or her own personal or business use (not for resale). The maximum deduction for a passenger vehicle weighing 10,000 pounds or less is $2,000 for tax years 2004 and 2005, $500 for tax year 2006 and $0 after. Currently, the deduction is available for the Toyota Prius, Honda Insight, Honda Civic Hybrid, Honda Accord Hybrid and Ford Escape Hybrid for the 2005 model year.

Make That Uniform Work for You: Uniforms and union dues are part of your employee business expenses. Enter them on Line 20, Schedule A. Of course, you can claim those expenses only if they add up (along with other things such as tax preparation fees, some investment expenses, etc.) to more than 2 percent of your adjusted gross income.

Do Your Homework When It Comes to Tax Breaks for Higher Education: You could be eligible for tax breaks if you return to school or have dependents attending school. You may qualify for the Hope credit, the lifetime learning credit, a deduction on your tax return if you itemize, or an exclusion for Series EE or I bond interest. The maximum Hope credit tax break is $1,650 per student ($3,300 for Gulf Opportunity Zone students). The maximum lifetime learning credit is $2,000 per return (up to 20 percent of the first $10,000 of expenses). You may also contribute up to $2,000 per year to a Coverdell Savings Account for your children, but that is a savings plan, not a tax credit or deduction. Tax breaks can make going back to school more affordable, so check with your tax professional and choose the option that is best for you.

IRS Tax TIPS for 2009

IRS experts have pulled together an overview of common tax issues in one convenient place.

— Publication 17.

 This updated publication contains a vast array of helpful information for individual taxpayers.

Need help deciphering the mysteries of the Roth IRA? Try Chapter 17 for retirement accounts.

Do you have a new child in the house? See Chapter 34 for the Child Tax Credit.

Are you selling stock for the first time? Check Chapter 16 for capital gains.

Do you need to report the profit on your home sale? See Chapter 15 for some good news.

To get a copy, visit the IRS Web site at IRS.gov