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Save Some 2009 Tax Bucks

Pay yourself via an IRA

Contributing to an individual retirement account can be done even after the calendar year has ended, points out Kuleck. "You can wait as long as April 15, and still take that IRA deduction off your 2009 taxes."

"Some people actually calculate their annual contributions by first completing their tax return and 'running their numbers' to determine how much they need to contribute to their IRA based on reducing or eliminating their federal income tax bill."

Consider tax-preparation software

With numerous federal tax code changes, the average taxpayer may want to turn to tax-preparation software to figure out what changes apply. "Generally, many changes affect families with children who can still be claimed as dependents (up to age 24 for full-time students)," she says. "If you have the usual one or two jobs with one or two W-2s, you probably can prepare your own return."

The IRS encourages filing federal taxes electronically if at all possible. Its Web site lists 20 providers of free online filing for federal returns. Many of them will file your state taxes for a fee.

Most commercial software walks you through a series of questions and fills out the appropriate form for you based on your responses. The software suggests various expenses you may have incurred that can result in either a deduction to your taxable income or a credit. If you provide your bank information, your refund can be safely in your account within two weeks or less after you've filed.

American Opportunity Tax Credit

This is actually a revision and extension of the Hope credit – up to $2,500 for each full-time college student. Now, it's open to a broader range of taxpayers, including those with higher incomes and those who don't owe taxes. College juniors and seniors can get the tax credit. It may reduce their tax liability to zero. Then they may get up to $1,000 per qualifying student back from the IRS.

Other important new wrinkles

Unemployment Compensation: For 2009, the first $2,400 of unemployment compensation received is excludable from gross income. "Normally all unemployment compensation is taxable. But the federal government recognized that people were struggling," Kuleck notes. "So, if you were unemployed in 2009, up to $2,400 of your unemployment compensation is tax-free."

Making work pay tax credit: It's a refundable credit of up to $400 for working individuals and $800 for married couples filing jointly. The credit is calculated at a rate of 6.2% of earned income and reported on Schedule M.

First-time home buyer credit: The deadline for this credit for first-time purchasers has been extended to June 30, 2010. It's a credit of 10% of the purchase price up to a maximum of $8,000. Tax law changes late last year also broadened it to include people who have owned and lived in the same home in five of the last eight years, and purchased a home after Nov. 6, 2009.

"The maximum credit for those families is $6,500," says Kuleck. This one's a little confusing since the change doesn't fit the IRS definition of first-time homebuyer. But that's the tax law.

Standard deduction vs. itemized: Some taxpayers still believe they can "write off" many expenses. It's true that property taxes, charitable contributions, unreimbursed medical expenses and mortgage interest can be deducted. But the total of these expenses may not exceed your standard deduction.

With mortgage interest rates at historic lows and the unstable economy reducing charitable giving, many households' itemized expenses don't exceed the standard deduction threshold. For example, the standard deduction for a married couple under the age of 65 using the "married filing jointly" status is $11,400. If you paid at least $500 in real estate taxes, you can add that to your standard deduction even if you don't itemize.

Easy-to-read income tax tips for moderate-income taxpayers are available online at extension.psu.edu/spotlight/income-tax.  Web site visitors also will find information about Pennsylvania income taxes as well.