You mention Zecco as being free, but they do have minimums to get free trading. I used Zecco for a year and was very disappointed with their service (slow, error-prone, hard to reach) Before signing up with them, check out the satisfacton rating with them and other brokerages.
It may not feel like it, but the tax year is rapidly drawing to a close. In less than a month we’ll starting 2010, so if you’re planning on making some year-end tax moves, now is the time. Unfortunately, most people wait until their W-2s and 1099s start coming in before seriously thinking about taxes, but by then you’re left with very few options to correct the current tax year mistakes. By planning ahead you can get a jump on some things that could significantly improve your tax situation in just a few short months.
First-Time Homebuyer Tax Credit
This probably goes without saying, but if you bought a new home this year you’ll want to take a look at this generous tax credit. Originally, it was meant only for first-time buyers who haven’t owned a home in the past five years and closed on their purchase before December 1st. Those who qualified would receive a nice $8,000 credit. But Congress has extended and expanded this credit to include even more people, so you still may qualify for something even if you didn’t under the old plan.
The new rules took effect on Nov. 6. The provision is a true dollar-for-dollar tax credit of up to $8,000 for 10% of the cost of a home. The credit is also refundable, meaning that even if a buyer doesn’t owe $8,000 of tax, they can claim the full benefit and receive a refund check. The new law also authorizes a similar $6,500 credit for buyers who already own a home. It too is a refundable credit for 10% of the purchase price of a house costing no more than $800,000. To qualify the buyer has to have owned and lived in the same home for five of the eight years preceding the new home purchase, and the new home must become the buyer’s principal residence.
Now, don’t rush out and buy a home just for the sake of the credit, but think about any home purchase you already made this year or were planning on making. This is a huge opportunity if you happen to qualify and you want to make sure you’re getting everything available to you.
New Car Purchase Deduction
Did you know there’s also a tax deduction if you buy a new car before the end of 2009? It didn’t get as much attention as the homebuyer tax credit, but there’s still some money out there for you to take advantage of if you happened to buy a new car this year. Honestly, I think you can still save more money buying a used car vs. new, but this tax break can help take some of the bite out of that new car purchase. This allows you to deduct sales and excise taxes and other fees on as much as $49,500 of the purchase price.
Again, since we’re only talking about deducting the sales and excise taxes on the purchase don’t go and run out to buy a new car just to get the tax credit. But if you are already in the market for a car and planned on buying a new one anyway, just make sure you try and get it purchased before the end of the year so you can qualify for the tax break.
Charitable Gifts and Donations
If you haven’t given to charity yet this year you still have time. Remember that these gifts follow a calendar year so you need to make those donations before the January 1st. As the holidays approach it can be a crazy time and people often forget about making their donations until it’s too late. So, don’t wait, and start thinking about what you’ll donate this year. If you’ll be taking clothes or other items to a place like Goodwill or the Salvation Army, begin collecting those items now and take them in before the holiday rush. If you usually give money to one of the charities each year you should make a call and get the ball rolling on that to make sure it qualifies for this year’s taxes. As always, make sure you keep receipts for all of your donations!
Adjust Your Tax Withholding
Even though we only have a few weeks left in the year you can still make changes to your employer’s tax withholding. If you are in a situation where you’re expecting to owe the IRS money come April you still have some time to make a helpful change. You can change your W-4 exemptions and even opt to have additional taxes withheld between now and the end of the year. This added withholding could be enough to offset some of the taxes you’ll owe when it’s time to file. Not only that, but it’s a good idea to review your withholding and make sure you’re not having too much or not enough withheld for the coming year. No sense in giving Uncle Sam a free loan or putting added stress on you to come up with the money because you didn’t withhold enough.
If you’re like many Americans this year, you’ve been laid off or had a period of time where you received unemployment benefits. As you may know, these benefits are taxed. It stinks, I know, but there is some relief this year. Individuals are exempt up to the first $2,400 this year.
If you didn’t elect to have taxes withheld from your unemployment check you could be on the hook for making a payment to the IRS come spring. Even worse, if you have been collecting all year and haven’t been paying quarterly estimated taxes you may face an additional penalty. If you haven’t had taxes withheld from your unemployment checks you should use this time to calculate how much of that income is taxable and find out how much you might owe. Start saving that money in the coming months so that if you are hit with a tax bill in April it won’t come as a total shock.
Do you contribute to your company’s 401(k) plan? Great! You still have time to contribute even more to your plan before the year is up on a pre-tax basis. If you can afford to it might make sense to increase your deferrals for the remainder of the year to give you that extra boost. Not only does it save on taxes, but you’re doing yourself a favor by putting a little extra away for retirement as well.
Even if you don’t have a 401(k) there is still plenty of time to take advantage of some of the other retirement saving vehicles like IRAs. The best part is that you have until you file your taxes, up to April 15th, to make your IRA contributions for the tax year. That means you still have over five months to make these contributions! If you’re saving in a traditional IRA that gives you $5,000 (or $6,000 if age 50+) in a potential tax break if you make the full contribution. For most people this equates to about $1,000 of tax savings. That’s nothing to sneeze at. And think about it, with so much time yet to make these contributions even if you haven’t contributed a dime yet this year you can still max out your IRA by saving $1,000 a month before the April deadline.
If you’re saving in a Roth IRA, you won’t be getting any tax break up front for your contributions, but you still have until April to get your 2009 contributions in. Remember, once that deadline passes you can’t go back in time and make contributions for that year. So, make sure you’re taking advantage of your IRA as much as possible. You’re retirement depends on it. If you haven’t even opened an IRA yet, don’t delay. You can open an account for free at any of the online brokerage companies like Zecco and TradeKing.
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About the Author: Jeremy Vohwinkle is a Chartered Retirement Planning Counselor® and spent a few years working as a financial planner. Today, he helps people make the most of their money by writing about personal finance here and elsewhere on the web. Jeremy is also Coach at Adaptu and a regular contributor for other publications such as Intuit, and American Express. Be sure to follow Jeremy on Twitter or Google+.
Year end is a great time for reflection, to stock of where you are, and think about what your financial future looks like. New Year’s resolutions without solid strategies to accomplish the new goals are almost certain to fail. Take advantage of the holiday break to give yourself a lasting gift, gear up for better financial habits in 2010. Most banks have online services that automatically parse your spending on their credit cards, atm, checking accounts, etc in a single graph, so you can see by category where the money is going. Many financial software programs also do this. The first step to improve your financial habits is getting a handle on your cash flow, and figure out where the money is going. The second step is making changes if you don’t like where it’s going. If you need to save more, this will show you where you can reallocate your cash flow. This is just like a diet, don’t wait till New Years, put the “donut” down NOW!
"To qualify the buyer has to have owned and lived in the same home for five of the eight years preceding the new home purchase"
Do you mean following rather than preceding?