What follows is a purely informative post on the topic of taxes, which isn’t exactly my forte. I find the subject of taxes a little on the dry side, but there’s nothing dry and boring about saving hundreds of dollars if you know what to do. The following guest post reminds us of the tax credits that were introduced or updated last year (2009) that can help put a bit more money in our pockets this year. So why not start saving money now?
Unless you’re obviously due for a refund, filing taxes isn’t something any of us looks forward to. With a sluggish economy and budgets tightening, many new credits are worth reviewing to lower our total tax liabilities and potentially give us a refund. Who wouldn’t want some extra dollars to put into their online savings account?
In 2009, the IRS has augmented and added tax credits that may be able to save us hundreds of dollars. Here are some tax credits whose details I’ve summarized, and which you may be able to take advantage of when filing your taxes this year.
2009 Tax Credits That Can Save You Hundreds
1. Making Work Pay Tax Credit – You can claim this credit to save 6.2% on income earned from working; but there are a few restrictions and/or guidelines:
- If your Modified Adjusted Gross Income (MAGI) is more than $95k, or $195k if filing jointly, you cannot claim the credit. Your MAGI is your total yearly earnings minus deductions, and before itemized deductions from Schedule A or personal exemptions are subtracted.
- The credit can be no more than $400 for an individual and $800 (if filing jointly).
- Make sure to claim the credit on Schedule M (Form 1040) even if your withholdings were already adjusted for the credit.
- Be cognizant that this credit will be reduced if you made more than $75k (single), $150k (joint), or if you received a $250 economic recovery payment in 2009.
2. Government Retiree Credit – The $250 credit ($500 jointly) is applicable if you are a government (Federal, State, & Local) retiree. Here are facts to know:
- It is applicable if you received a government pension or annuity payment in 2009.
- You cannot claim this credit if you took the $250 (individual) or $500 (joint) economic recovery payment.
- If only one of you and your spouse receives a $250 economic recovery stimulus check for the year, then you can claim $250.
3. First Time Home Buyer Credit – This credit can save you thousands (up to $8k filing jointly or $4k if filing separately) but just like any other IRS credit, there are restrictions to be aware of. Here are samples of some of those conditions:
- You must have purchased your home after 2008 and on or before 4/31/2010. This deadline can extend to 7/1/2010 with an executed contract before 5/1/2009.
- In order to qualify, you or your spouse should not have owned a home for 3 years prior to your new home purchase date.
- The credit falls to $6.5k for existing home owners ($3,250 if married and filing separately) who lived in a home for 5 years prior to the purchase date. Also, the same dates apply to new home buyers, but the start date for a home purchase by new homeowners must be after 11/6/2009 and on or before 4/30/2010, and the purchase must be that of their main home or the home they’ve lived in for most of the past year.
- You must be a resident and still live in the house you purchased, in order to qualify. Your modified gross income cannot be more than $95k, or $170k (if filing jointly), if you purchased before 11/7/2009.
- If you purchased the home after 11/6/2009, then your modified gross income cannot be more than $245k filing jointly or $145k or higher if single. Realize that the credit starts to phase out once you earn over a certain amount — depending on whether you bought your home before or after 11/6/2009.
- You must not have purchased the home from a direct relative (on either side of your family, if you’re married).
- You must not have purchased the home from a corporation where you own more than 50% of the outstanding stock or where you are in a partnership.
4. Earned Income Tax Credit – There were a few changes to the EIC or Earned Income Tax Credit which largely helps low wage earners:
- It increased for people with 3 children or more but you must have made less than $43,279 if single and $48,279 if filing a joint return.
- If you have two children and you earned less than $40,295 (if single) and $45,295 (if filing jointly), then you are eligible for the credit. If you have 1 child then it is $35,463 (single) and $40,463 (joint) respectively.
- If you have no children, the maximum earnings to qualify for the credit is $13,440 (individual) and $18,440, if married.
- No matter what, in order to qualify for the EIC, you’ll need to file a tax return.
5. Electric Vehicle Tax Credit – If you purchased a hybrid, fuel cell, or learn burn technology vehicle then you can qualify for this credit. There are a few restrictions:
- The credit you can claim is set by the year, make and model of your vehicle, and should be certified and provided to you by the manufacturer; your car must be in service in 2009.
- If you are converting a normal vehicle to an alternative or electric vehicle, then the credit is the lesser of $4k or 10% of the cost of making the conversion.
- If you purchase the hybrid car from a manufacturer who sold it to you for at least $60,000, your credit can be reduced, but talk to a dealer to get clarification.
- There are restrictions applied if you purchase certain car models of a certain weight.
6. Adoption Tax Credit – The maximum amount for the Adoption Tax Credit has increased to $12,150, but again there are a few caveats:
- The credit is applicable only for expenses incurred from the adoption process (on the year they were paid), unless the child is a special needs child.
7. American Opportunity Tax Credit – This is a new tax credit for 2009 and 2010 in lieu of the Hope Tax Credit. The maximum credit per student is $2.5k. Here are a few details to note:
- This credit is only available for the first four years of post-secondary education (e.g. after high school). With the previous Hope Tax Credit, the credit was only available for 2 years, so that’s an improvement.
- The credit is only available if your modified gross income is $80,000 or less (if individual) or $160,000 or less (if married and filing jointly).
- You cannot claim this credit along with a Hope Tax Credit in the same year.
8. Non-business Energy Property & Residential Energy Credit – This credit is in effect for homes that have made energy efficient improvements. The maximum credit is $1,500.
- You can take a credit for any residential energy efficient improvement that will remain intact for at least 5 years.
- Energy enhancements that make you eligible for the credit include improvements to exterior windows and doors, and installing special roofing to save energy.
- Other residential improvements include the installation of water heaters, solar technology, electric heat pumps, central air conditioning, natural gas and oil furnaces in your home.
For more information about these tax credits, please visit the IRS.gov website. All in all, some of these tax credits can save you some serious money and it is in your best interest to see if you qualify for any of these. Use a software program like TurboTax or a tax preparation service, as typically, the savings outweigh the costs.
Matt Robinson is a tax accountant with Taxdebthelp.com. He’s been providing tax debt assistance for over 11 years now. His firm specializes in tax solutions and has re-launched a new site that shows how taxpayers can actually resolve their IRS tax problems.
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