Frugal taxes. . . .

The tax season is almost upon us! Last week I briefly mentioned a realization that I recently had concerning my tax refund this year. Because my salary is relatively low compared to the money I spend on my mortgages (most of which is interest payment), I generally receive a nice, hefty tax refund. Last year's refund allowed me to pay down a good chunk of credit card debt, and add some money to my emergency fund.

This year, however, I created a little estimate of my 2008 tax refund, and determined that--because of the earnings from my second job--I'll be lucky to get even $200 back! Egads! I was counting on a healthy refund to pad my 'internship year' fund, with which I'll make up the loss in earnings I'm anticipating next year. (Note: it's amazing to me that I'm even planning ahead for this. A year and a half ago, it would never have entered my mind that I would actually be able to save enough money to allow myself to work part-time temporarily).

I've been reading articles about the latest U.S. 'stimulus package' to learn whether I can expect a 'rebate' check this year, which may help. Actually, there appear to be quite a few changes in the works that could help many American taxpayers this year:

• First-time homebuyer's credit: my prospective realtor mentioned this to me late last summer, when I was researching the feasibility of selling my house (I decided not to try just yet). The catch is that the $7,500 'credit' is actually an interest-free loan to be paid back over 15 years. There are rumors, however, that the 'loan' may be transitioned into a true 'credit', though, so if you purchased a home after April 8, 2008, you will want to keep your ears pricked.
• Foreclosure tax break: I sincerely hope none of you are in the midst of a financial crisis that resulted in the foreclosure of your home. However, if this did happen, there appears to be a (slight) silver lining to that black cloud: Whereas in the past, forgiven mortgage debt was actually TAXED, this year any forgiven debt under $2 million will be tax free.
• The standard deduction is increasing: to $10,900 for married couples filing jointly, to $5450 for singles and married filing separately, and $8,000 for head of household.
• The personal exemption is also going up: of course, it's increasing by a mere $100, but in this kind of economy, every little bit helps!
• Don't forget the benefit of free filing: if your adjusted gross income is less than $56,000, you're eligible for Free File. I use H & R Block, and have found the website to be user-friendly and accurate. There are many companies that can help, though, so go to http://www.irs.gov for more information.

Most of these changes and new benefits don't apply to me, unfortunately. And it sounds as if any new stimulus package will result in lower payroll taxes, rather than a lump sum payment, which may make it more difficult to save. If, in fact, our payroll taxes are lowered, I plan to pay close attention to how much this increases my take-home pay, and will have that amount automatically sent to my savings account---if I never 'see' it, I won't spend it!

The inevitable disclaimer: I'm not a tax professional, just a mere mortal trying to figure this stuff out myself. For questions or more information, check out the IRS website. I've actually found this site to have a wealth of information, especially the various electronic publications housed on the site---there's even a toll-free number you can call for additional assistance!