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Tips for the Tax Season

Tax time can be a stressful and frustrating time, gathering all the information, doing your taxes yourself or making an appointment with your tax preparer. MSN Money recently had a great article about the tax breaks and credits for the 2010 tax year that can save you money. Here are some highlights:

1. Check on the first time homebuyer’s credit. If you bought a home in 2010 as a first-time home buyer, you may be entitled to $8,000 tax credit. Also, people who lived in their home for 5 years and sold in 2010 may qualify for a credit of $6,500.

2. If you are single, the standard deduction went up for last year to $5,700.

3. Free Parking. If your company paid for parking or transit costs, you don’t have to pay taxes on those costs if the amount was less than $230 per month.

4. College Tuition Tax Credit. We used to have the Hope Credit. Now that has been replaced by the American Opportunity Tax Credit which allows you to get a credit of up to $2,500 per student, depending on your income, for tuition and books. Also you can deduct up to $4,000 for college tuition.

5. If you have 3 or more children, check out the Earned Income Tax Credit which has gone up for 2010 returns to $628.50.

6. Higher annual gift tax exemption. In 2010, you could give anyone up to $13,000 without any gift tax.

7. Credit for money-savings home improvements. If you made energy savings improvement, such as insulation, new heating or air conditioning, or doors and windows, you can get a credit of $30% of the price, up to $15,000.

8. Teachers Deduction. If you are a teacher you can deduct up to $250 for non-reimbursed expenses you incurred for books, supplies, computers or software, or other supplies used in the classroom.

9. IRAs. As a single person if your modified adjusted income is less than $66,000 or $109,000 as a married couple, you can deduct money you contributed to an IRA. Also if you converted a traditional IRA into a Roth IRA, you have to pay the taxes to do the conversion but you can spread it out over 2 years.

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