Monday, April 13, 2009

Use Tax Time to Improve Your Financial Life

Earlier this morning I ran across this great article from discussing the ways you can use the time you spend on your taxes to improve your overall finances. You can find a snippet of the post below.

The day after Tax Day is one of relief for many last-minute filers. So I’m going to let you have your day of rest.

But the day after that is one all of us — early birds, deadline beaters and extension filers — need to designate as a new beginning.

April 17, Friday this year, is a good day to start re-energizing our financial lives.

“Tax time is a planning opportunity, not just a reporting opportunity,” said Brent Neiser, a certified financial planner and top executive with the National Endowment for Financial Education in Colorado.

Yes, the tax forms you’re filling out now — or trying to fill out or filed already — report your income, but they also give you much of the information you need to manage your money better.

Neiser’s organization is conducting a survey of tax-filers who use free tax help centers sponsored by the Internal Revenue Service to gauge taxpayers’ understanding of their own financial circumstances.

It’s a literal example of using tax time to improve personal finances that you can follow. Ask yourself:

  • What is your family’s income?
  • Where, what and how much do you owe?
  • When are monthly bills due?
  • What are your occasional big expenses?
  • What are your fixed expenses?
  • What are your controllable expenses?

Plug those answers into the money management worksheets at NEFE’s under the resource library link to shape your spending plan and set financial goals.

Next, start researching new tax changes for 2009. The stimulus package has several new laws that will create certain tax benefits for many people. More are likely to follow these.

One in particular to note is the first-time home buyer tax credit.

Taxpayers who buy their first home between Jan.1 and Dec. 1, 2009, can claim a credit of $8,000 or 10 percent of the purchase price, whichever is smaller.

And unlike the version of this credit in place for 2008 home purchases, the credit does not have to be paid back as long as you live in the house for 36 months after the purchase date.

Another thing you should know is for purposes of the tax credit, a first-time home buyer is person or couple who has not owned all or a portion of a principal residence in the United States during the 36 months before purchasing the home for which the credit is claimed.

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