Tax time is a time of year that is stressful for everyone. Rushing around, trying to gather all the necessary paperwork and receipts, and making sure that the forms being used are the correct forms for the financial situation can seem daunting, especially for young adults and recent college graduates who are facing tax season for the first time without the aid of their parents.
It may seem like a long way away, but April 15 will be here before many of us are ready and being prepared can help alleviate some of the tax season stress.
The federal government has added new tax credits and a new deduction for this tax year.
''There is the new first-time home buyer tax credit,'' said Michael Placer, owner/operator of Ford Income Tax, on Market Street in Warren. ''It works as an interest free loan.''
The credit can be claimed for up to 10 percent of the purchase price of the home, up to $7,500. According to Placer, the credit will have to be repaid beginning two years after the credit is claimed. So, for those who claim the first-time home owner credit for the 2008 tax year, they will have to begin repaying in 2010 for a period of 15 years.
Another addition this year is a change in the real estate tax deduction for individuals who pay property tax. ''One thing new is a reduction of up to $1,000 in real estate taxes added if you don't itemize.'' said Gerald Bayus Jr., enrolled agent.
''There is a property tax credit for all home owners who pay property taxes - up to $500 per person,'' Placer said.
The deduction would not be the same as the home buyer credit, ''it reduces their taxable income,'' said Placer.
For the new generation of adults, there are also deductions and credits available for individuals who are attending college. ''Depending on the situation, you may be eligible for the Hope Credit or the Lifetime Learning Credit,'' Bayus said.
The Hope Credit is a credit of up to $1,800 per eligible student that is available only for the first two years of college. The student must be enrolled at least half-time and pursuing an undergraduate degree. The Lifetime Learning Credit is slightly different in that it is available for all years of college and can be used by an eligible student who is attending one or more courses.
An important note, according to Michael Placer, ''There are educational tax credits. If a person has tuition paid to a university, the credit goes to the person claiming the depending exemption of the student.'' Meaning, if a student is still being claimed as an exemption on their parent's return, the credit will be used on the parent's return.
For those individuals who have finished school and have begun the student loan repayment process, there is a deduction on paid loan interest. ''Since loans will be in repayment, all that student loan interest is deductible to the student,'' Placer said.
The amount of paid student loan interest should be sent in a statement from the financial institution managing the student's loan.
The most important thing to remember when preparing for tax season is to remain organized and get started as soon as possible. Keep track of all forms and statements that have been sent out by loan companies, mortgage companies and employers.
To ease the filing process, there are a number of electronic filing options that minimize mistakes when filing and offer quicker refunds, but they often charge for the service, so it may be necessary to weigh the cost of the service with the refund that may be coming.
Remember, deadlines for filing taxes is April 15.