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New tax breaks for 2009!! Amidst the backdrop of the worst recession since the Great Depression comes news that Uncle Sam has enacted new tax credits and deductions to help ease the burden of the overly burdened taxpayer. The following is brief list of credits and deductions available this year to put some money in your pocket and help brighten your day! Making Work Pay Tax Credit: This credit for working individuals is generally $400 for single and $800 for married couples. The credit is claimed on the 2009 tax return. Most wage earners are already receiving the benefit through reduced withholding in their paychecks. Those on Social Security, SSI, Railroad Retirement or Veteran’s Benefits, who may not qualify for this credit, should have already received an Economic Recovery Payment of $250 in the mail. First-time Homebuyer Credit: This credit allows first-time homebuyers an $8,000 refundable tax credit on either their 2008 or 2009 tax return. The home must close escrow between January 1, 2009 and November 30, 2009, and the home must be used as the taxpayer’s principal residence. First-time homebuyers that purchase a home in 2009 but have already filed their 2008 tax return may file an amended return for 2008 and receive the $8,000 currently! Residential Energy Property Credit: This credit allows homeowners a credit of 30 percent of the cost of qualifying energy efficient improvements made to their existing homes. The maximum credit is $1,500 and applies to energy efficient improvements made in 2009 and 2010. The credit applies to improvements such as adding insulation, energy efficient exterior windows and energy-efficient heating and air conditioning systems. Higher Education Tax Credit: This credit allows undergraduates who attend college at least half time to receive up to $2,500 in tax credits for tax year 2009 (and 2010). Taxpayers can claim 100 percent of the first $2,000 spent on tuition, fees or course materials, and 25 percent of the next $2,000 spent on the same things. If the credit exceeds the tax liability, then 40% of the remaining credit is refundable. The credit applies to taxpayers and their dependents.
Sales tax deduction for Vehicle Purchases: This deduction applies to NEW cars, light trucks, motor homes and motorcycles purchased between February 17, 2009 and December 31, 2009. The sales tax (including any excise taxes) is deductible whether or not you itemize other deductions on your tax return. The deduction is limited to taxes paid on up to $49,500 of the purchase price. Tax-Free Unemployment Benefits: The first $2,400 of unemployment benefits received in 2009 are tax-free!! Suspension of Mandatory Retirement Plan Distributions: Mandatory distributions from pension plans and IRA accounts are suspended for 2009. Generally, when a taxpayer reaches age 70 ½ mandatory distribution rules require that a minimum distribution be taken from such plans. Due to the decline in pension plan and IRA account balances in the last couple of years, the IRS is allowing a one year reprieve from the mandatory distribution rules. For additional information, please see the article previously posted on this website. For questions or additional information pertaining to the above credits and deductions, please contact us at your convenience. Our expert staff will assist you with all your tax and financial planning needs.
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