It’s tax season again and that means finding a way for us to get it done easily and correctly. This year I’m reviewing Turbo Tax and I wanted to share some of my thoughts as I went through their program.

Entering Business & Personal Income

Turbo Tax made it really easy to get this information. It’s done in an interview style. As you go through the process, TurboTax will keep updating the amount of your refund (or taxes owed).

Looking at tax refund.....

Self Employed: After entering our personal information, I was prompted to enter my business income for 2009. Throughout the tax interview, Turbotax shows the amount of tax owed or the refund to expect at the top of the screen. It’s nice to have a running tab as you go through the process. I personally enjoyed seeing the refund amount.

W-2s and Personal Income: Filling out our personal income was easy with Turbo Tax and it took a few minutes.

Something that I liked with Turbo Tax this year was how simple it was to correct and fill in information. If you forget to fill in an amount, it will right away catch this and you can fix it. This avoids you pulling out the W-2 again much later. There is also a fantastic flag feature that you can use to book mark certain areas you need to look over again.

Tax Deductions and Credits

Once we entered information, Turbo Tax helped us with tax deductions and credits. The goal is to make sure you don’t miss a single deduction or tax credit. Turbo Tax will comb all the deductions and credits. I wanted to highlight just a few of the topics that Turbo Tax reviews with you.

Tax time is much easier with Turbo Tax.

Business Deductions: Turbo Tax reviewed my business information and inquired about certain expenses that I might be able to deduct, such as vehicle for business use.

Mortgage: Quicken asked if we owned a home in 2009 to interview and possibly pick up some deductions. Unfortunately we did not own a home in 2009.

Family: Many of the deductions and credits did not fit us and our circumstances, but I was impressed with how thorough the interview was. It covered:

• Child and Dependent Care
• Earned Income Credit
• Adoption Expenses

Cars and Personal Property: Did you know that some states you can deduct car registration fees, like California?

Live Community Feature

This by far is my favorite feature of Turbo Tax. They’ve collected thousands of questions over the past 3 years and created a resource that allows you to get the answer to some of your most common tax questions. Tax experts are moderators, checking to make sure the answers are correct so you’re not given bad information.

Grab a Copy of Turbo Tax

You can either purchase a desktop copy of turbo Tax by box or download,  or you can do all your taxes online. If you’re looking at another opinion, check out Matt Jabs’ wonderful Turbo Tax review on Debt Free Adventure.

Photo Credit: alancleaver_2000

Getting a tax refund can be a great thing or a bad deal depending on whom you speak to. Financial Samurai was sharing his take on tax refunds and I  agree with him. While some may complain you’re giving the government your money interest free, if the alternative is you spending the money on frivolous things , then it’s worth having it in a lump sum. For some people, having a tax refund motivates them to spend their money a little more seriously.

Consider using your tax refund to build your finances.

Maximize Your Tax Refund’s Potential

If you’re getting a big refund, look at it as a chance to improve your finances with a big shot.

Create a bare bones emergency fund. Before you do anything else, you should have a barebones emergency fund. How much is that? For most college students and new graduates, I say it’s somewhere between $500 and one month’s worth of essential expenses. You can build it up through out 2010 with automatic deposits.

Pay off a high interest credit card. If you’ve created an emergency fund and have some money left, then go ahead and pay off a credit card if you can or at least pay a big chunk off. Even if you only manage to pay off a small store credit card you’re giving yourself a big win. You can work on your debt snow ball during the rest of the year.

Deposit the remainder into a Roth IRA. Why should you care about a Roth IRA while you’re in college? Starting an IRA even with $500 has some big consequences thanks to the power of compounding interest.

Spend 20% on What You Want

Despite all the smart financial choices you can make, it doesn’t mean you can’t have some fun with it. You should keep 20% for yourself.  The catch is you have to wait a month before you use it.  Why?

Waiting at least a month can give you time to really figure out how you want to use the money. Do you want to travel? Do you want to save money for a TV? Do you want to donate that money to a charity or a family member dear to you that‘s in need?

Only you know what will give you the most fulfillment. Just don’t squander it away quickly.

Your Take

Which method do you prefer? If you like receiving a bigger tax refund, how do you spend it? What advice do you have for the size of a bare bones emergency fund?

Photo Credit: NickStarr

What is the deal with $8,000 Tax Credit for First-Time Homebuyers?

The big financial news this week is that the Tax Credit for First-Time Homebuyers that was set to expire on November 30, 2009 has been extended until April 30, 2010. It also has been expanded to include a$6,500 tax credit for current home owners who buy a new house. President Obama is expected to sign the bill this morning.

Do you plan on buying a house?

Eligibility for the First-Time Homebuyer Credit

There are some requirements you have to meet before you can get the First-Time Homebuyers credit.

• You must be a first-time home buyer and you must have a purchase contract by April 30, 2010 and closes by .
• The house you purchase must be your primary residence and is not greater than $800,000.
• The buyer must live in the home for at least three years after the purchase date. You will have to repay the credit on a home only if the home ceases to be your primary residence within 3 years from the date of purchase. The full amount of the credit received becomes due on the return for the year the home ceased being your principal residence.
• The income limits have been raised for singles to $125,000 and married to $225,000.

Eligibility for the Existing Homebuyer Credit

• You must have lived in your current residence for 5 of the last 8 years.
• The house you purchase must be your primary residence and is not greater than $800,000.
• The buyer must live in the home for at least three years after the purchase date. You will have to repay the credit on a home only if the home ceases to be your primary residence within 3 years from the date of purchase. The full amount of the credit received becomes due on the return for the year the home ceased being your principal residence.
• The income limits have been raised for singles to $125,000 and married to $225,000.

Please check out the NY Times for more details and other provisions in the bill.

Your Thoughts

Will you buy a house within the tax credit’s extension? How much did the tax credit factor into your plans?

Photo Credit: roarofthefour

Use the Hope Scholarship Credit to your advantage.

With many students going to and  returning to classes, I wanted to remind you that you want to claim your Hope Scholarship Credit come tax season.

What is the Hope Scholarship Credit?

The Hope Credit is an educational tax credit that can reduce your income tax.

The IRS has specific guidelines to qualify for the Hope Credit. They also adjust the maximum amount of the credit occasionally.

Income limits increased. The amount of your Hope credit for 2008 is gradually reduced (phased out) if your modified adjusted gross income (MAGI) is between $48,000 and $58,000 ($96,000 and $116,000 if you file a joint return). You cannot claim a credit if your MAGI is $58,000 or more ($116,000 or more if you file a joint return). This is an increase from the 2007 limits of $47,000 and $57,000 ($94,000 and $114,000 if filing a joint return).

Maximum amount of Hope credit increased. Beginning in 2008, the maximum amount of the Hope credit has increased to $1,800 ($3,600 if a student in a Midwestern disaster area). This is an increase from the 2007 maximum amount of $1,650.The amount of the Hope credit (per eligible student) is the sum of 100% of the first $1,200 ($2,400 if a student in a Midwestern disaster area) of qualified education expenses you paid for the eligible student and 50% of the next $1,200 ($2,400 if a student in a Midwestern disaster area) of qualified education expenses you paid for that student.

Source: IRS Publication 970

Note: You cannot claim both Lifetime Learning Credit and Hope Credit for the same person.

In 2009 and 2010, the American Recovery and Reinvestment Act temporaily expands the Hope Credit (calling it American Opportunity Credit) to include more students and parents.

The new credit modifies the existing Hope Credit for tax years 2009 and 2010, making the Hope Credit available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.

The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return.

Source: IRS Publication 970

Hat tip to reader Mneiae for mentioning the changes in 2009 and 2010!

What’s the Difference Between the Lifetime Learning Credit and the Hope Scholarship Credit?

The Hope Credit requires you to be at least a half time student in the first two years of college. The Lifetime Learning Credit applies for anyone seeking post secondary education, whether it is a degree or a class to improve your career skills.  The Hope Credit requires that you work towards a degree to claim it on your taxes.

What’s Best Option for Me Tax Wise?

I’m not a financial planner and I don’t know your personal circumstances. For more information on the Lifetime Learning Credit and other tax benefits for college students, check out the IRS’ website.

The IRS has information to help you determine which tax credit is best for you and your family. Did you know that there is a  tuition and fees deduction for your education expenses? The IRS has information on that as well. Choose the option that will give you the lower tax.

Photo Credit: stopnlook

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Use the Lifetime Learning Tax Credit to your advantage.

With many students going to and  returning to classes, I wanted to remind you that you want to claim your Lifetime Learning Credit come tax season.

What is the Lifetime Learning Credit?

The Lifetime Learning Credit can be used for qualified tuition and other related expenses up to $2,000 a year. Note: You cannot claim both Lifetime Learning Credit and Hope Credit for the same person.

If you make $48,000 or more ( $96,000 if you file joint), you will start to phase out with benefits. If you make more than $58,000 (or $116,00 if you’re married), you can not claim the tax credit.The is no limit to how many years you can claim the tax credit.

What’s the Difference Between the Lifetime Learning Credit and the Hope Scholarship Credit?

One benefit of the Lifetime Learning Credit is you aren’t require to be at least a half time student in the first two years of college. so even if you’re taking one course a semester, you can qualify for the credit (provided you meet the other requirements).

You can also use the tax credit for classes to improve your job skills. The Hope Credit requires that you work towards a degree to claim it on your taxes.

What’s Best Option for Me Tax Wise?

I’m not a financial planner and I don’t know your personal circumstances. For more information on the Lifetime Learning Credit and other tax benefits for college students, check out the IRS’ website.

The IRS has information to help you determine which tax credit is best for you and your family. Did you know that there is a  tuition and fees deduction for your education expenses? The IRS has information on that as well. Choose the option that will give you the lower tax.

Photo Credit: stopnlook