Hitting HENRY hard

As a proud member of the Ways & Means Committee I was called in and instructed that my blog entry on HENRY was a slap in the face of my membership. As a result, here is my attempt to rectify the situation.

Here is how a single filer (HENRY) who makes above the $75K-phase-out-to-$95K-cutoff can still take advantage of the $8K tax credit for first time home buyers who buy a home between 1/1/09 and 12/1/09.

First off, LEGALLY shelter as much of your money from the IRS as possible:

1. Max out your 401K contributions - $16.5K (great time to buy)
2. Medical & Dental paycheck deductions - ~$1K (conservative guess of $1K for HENRYs)
3. Max out Health Savings Account contributions - $3K (NOT use-it-or-lose-it)

Total sheltered is $20.5K.

Second, in this economy you should be able to find the maximum amount of $3K in stock losses above any capital gains to apply towards income.

1. $3K in capital losses above capital gains applied towards income.

Total offset to income is $3K.

Grand total is $23.5K. Hence a HENRY who makes a salary all the way up to $98,499 (minus the $23.5K gives us $74,999) is still able to get the FULL tax credit and a HENRY who makes a salary all the way up to $118,499 (minus the $23.5K gives us $94,999) is still able to get a partial tax credit.

Of course, I am sure other ways to shelter money exist such as Flexible Spending Accounts (Medical Expense & Dependent Care) but these are the ones that quickly come to mind where you run no risk (use it or lose it) of losing the money you sheltered. Additionally, you may have other income such as interest and dividends so please consider your exact situation and account for ALL sources of income when performing these projections.