DEDUCT CAPITAL LOSSES. If you sold stocks or mutual funds (except for those inside a retirement plan) at a loss before year-end, you can deduct up to $3,000 against your ordinary income. Any additional losses can be carried forward to future years. That $3,000 deduction hasn't been increased in many years, and should be expanded in the next tax bill. Unfortunately, you can't deduct losses on sales of collectibles -- or your residence.
USE CAPITAL GAINS. Many retirees who are selling stocks or mutual funds to pay for living expenses should be aware of special treatment of gains for those in the 15 percent bracket. According to H&R Block: "In 2008, 2009, and 2010, taxpayers in the 15 percent or lower tax brackets will pay no tax on their net long-term capital gains and qualified dividends." That presumes you still have capital gains!
(And by the way, if you have extra money to "give away" this year, you're allowed a gift tax exemption of $13,000 in 2009, up from $12,000 in 2008.)
It's a good bet that Congress will get around to rearranging the tax code this year -- after it deals with the bank bailouts and economic woes. Everything from income taxes to estate taxes to bankruptcy forgiveness will be on the table. Odds are, you'll be paying more next year -- in spite of all those campaign promises.
Meanwhile, get going on your 2008 return. If all these changes confuse you, try popular tax programs like TurboTax and TaxCuts. They've been updated to easily guide you through all the new programs. And they'll help you file online to get any refund more quickly.
If you happen to get a refund, you can join the 48 percent of respondents to a CRI survey who say they will use it to pay off debt. At these rates, it's better to owe the government than the credit card issuers. And that's the Savage Truth.