The Focus - Our Tax E-Newsletter
Step Right Up - IRS Prizes
As the days of summer all too quickly passed by, many of us found ourselves strolling the grounds of the local county fairs or the Great New York State Fair. We viewed the livestock, pies and produce all vying for that blue ribbon prize. We heard the barkers call "step right up" and we were tempted to slap down a dollar bill with hopes of winning the stuffed animal or bowl of goldfish. The Internal Revenue Service has what could be a valuable prize for the lucky person. The American Recovery and Reinvestment Act of 2009 (ARRA) provides numerous tax incentives for individual taxpayers all with an expiration date. So step right up and take advantage of them while you can. Could you be a winner?
Buy a home - take a credit:
Taxpayers who didn't own a principal residence during the last three years and purchase a home this year can be the lucky winner of a $8,000 (maximum) refundable tax credit. The 2009 expanded credit does not have to be repaid unless the home is no longer the taxpayer's principal residence. The 2009 tax credit applies to purchases that close before December 1, 2009. There is a phase out for higher income taxpayers. Planning opportunities exist in determining whether to claim the credit on the 2008 or 2009 tax return. So step right up and make sure you close by November 31st.
Buy a car - take a deduction:
ARRA provides a prize to taxpayers who make qualified new vehicle purchases after February 16, 2009 and before January 1, 2010. Qualified motor vehicles must have a gross weight of 8,500 pounds or less and the taxpayer must be the first owner. Taxpayers can deduct the state and local sales and excise taxes paid on the purchase of new cars, light trucks, motor homes and motorcycles without limit on the number of vehicles purchased. This deduction is available regardless of whether a taxpayer itemizes deductions on Schedule A.
Cash for Clunkers - Hurry, it's going fast
The highly publicized and popular Cash for Clunkers Program (Car Allowance Rebate System) runs through November 1, 2009 or until the funds are exhausted. As we wait to hear whether additional funding will be authorized, here are a few basics: Qualified consumers may receive a credit of $3,500 or $4,500 for an eligible trade-in toward the purchase or lease of an approved vehicle. For the most recent updates, check out this website, www.cars.gov.
Make your Home Energy Efficient
The credit for nonbusiness energy property is increased for homeowners who make qualified energy-efficient improvements to existing homes. ARRA increased the rate to 30 percent of the cost of the improvements and raised the maximum credit limit to a total of $1,500 if placed in service in 2009 and 2010. Qualifying improvements include the addition of insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning systems.
College - the American Opportunity Credit (AOC)
Taxpayers previously ineligible under the Hope Credit provisions may be able to claim the prize in the form of the American Opportunity Credit up to $2,500 per student. Tuition, related fees, books, and other course materials qualify. Additionally, ARRA provides that college expenses paid for by a qualified tuition plan (529 Plan) now includes computers, computer peripherals, and internet access.
Making Work Pay and Withholding
The Making Work Pay Credit lowered tax withholding rates. However, some taxpayers should review their tax withholding rates to ensure enough tax is withheld, including multiple job holders, families in which both spouses work, workers who can be claimed as dependents by other taxpayers, and pensioners. Similar to the prize goldfish floating belly side up by Labor Day, beware of the downside to this incentive. If withholdings are not adjusted, the anticipated refund may be replaced by the dreaded balance due. As the saying goes: "We've stayed too long at the Fair".
The information reflected in this article was current at the time of publication. This information will not be modified or updated for any subsequent tax law changes, if any.