These 2009 tax credits should make April 15th less demanding
But on the plus side, if you're thinking about your taxes already and not trying to make sense of everything on April 14, then you have some time to ponder what gifts Uncle Sam has come up with to make paying your fair share feel a little more fair. As in -- tax credits.
Chances are, you just may be thinking about tax credits. According to the good folks at Yahoo, searches for "2009 tax credits" have gone up 220% in the past week.
Anyway, if you're wondering what tax credits are out there that you might tax advantage of, then get comfortable, and start cutting and pasting this article, or pulling out a pen and taking notes. We chatted with several tax experts around the country, and here's what they said to look out for:
First-time home buyer credit. This was popular for people doing their taxes last year, and it's still available this year. You can get an $8,000 refundable credit on your 2009 tax return for purchases between Jan. 1, 2009, and April 30, 2010, according to Intuit's senior tax consultant Mike D'Avolio. Now, if you're not a first-time home buyer -- you're living in a house but are trading it in for a new one -- you may be in luck. If you bought a house for less than $800,000 after Nov. 6, 2009, you can get a reduced $6,500 credit. (Man, that has to be frustrating for anyone who lives in a house and bought a new one -- on Nov. 5th.)
"Unlike similar credits in years' past, this credit is fully refundable," adds Roni Deutch, president of Roni Deutch Tax Center, which has locations across the nation. "And there isn't a payback requirement -- unless you stop using the home as your primary residence within 36 months of purchase."
Another thing to be aware of, according to Amy McAnarney, executive director of the Tax Institute at H&R Block. She says that a special provision gives taxpayers two extra months to close if they've entered into a contract by April 30, 2010. (Obviously, if you're buying a house after April 15, and you want to take advantage of the credit, you'll be filing an extension.)
Heads up on your filing, though. Melissa Labant, the technical manager at the American Institute of Certified Public Accountants, offers a reminder that "if you do take the home buyer credit, you can't file electronically."
Why? "Because you need to attach the settlement documents to the return," says Tom Ochsenschlager, vice president of taxation for the AICPA. "Not everyone has a scanner."
Still want more info? Try the IRS. They have a ton of information on this web page.
American Opportunity Credit. "This new educational tax credit takes place of the Hope Credit," says Deutch. "The American Opportunity Credit is good for the first four years of any post-secondary education. The credit allows you to claim up to $2,500 in qualified tuition and expenses (including books and fees). This credit is also partially refundable, meaning that even if you have no tax liability, you may receive a tax refund for up to 40% of your allowable credit."
So potentially, you could be looking at a refund of $1,000, says Labant. "Another nice difference is that the Hope Credit was limited to the first two years of education --this has been expanded to four years."
Ochsenschlager adds that you'll want to determine if you're better off claiming your college student as a dependent or taking the credit -- you can't do both -- and it's not available to the people making scads of money. If your combined married income is $160,000 or less, then you're a candidate for this credit. If you need more info, here's what the IRS has to say about it.
Making work pay credit. This was part of the American Recovery and Reinvestment Act of 2009, which was signed into law by President Obama in February 2009. It allowed taxpayers to see a little extra money in their paychecks from last April until December. You have to claim it on Schedule M when you do your taxes, but that extra income isn't taxable.
"This refundable credit provides a maximum of $400 for working individuals and $800 for working married couples," says D'Avolio. "Most wage earners benefited with a larger paycheck as a result of the changes made to the federal income tax withholding tables to implement the credit. Self-employed individuals were allowed to adjust their estimated tax payments in 2009. If taxpayers did not have their withholdings or estimates adjusted in 2009, they can claim the credit on their tax return."
"The credit," adds Rebecca Pavese, CPA, with Palisades Hudson Financial Group, "is calculated at a rate of 6.2% of earned income. It phased out at modified adjusted gross income of $75,000 for single filers and $150,000 for married couples filing jointly."
Yes, it's all a bit confusing, and you know what we're about to say: for more information, you may want to check out this handy dandy IRS web page on the making work pay credit. Bankrate.com has some good information as well.
Those are the three main highlights, but there are still other tax credits out there. Robert Swartz, a CPA based in Libertyville, Ill., for instance, points out that you can get a tax credit if you've installed certain energy savings improvements "such as insulation, doors, windows and heat pumps. The tax credit is 30% of the cost, up to $1,500." And he notes that there's a child and dependent-care tax credit of 20% to 35% that goes toward day care if you're unemployed, looking for work and have a dependent under the age of 13. (Lots of IRS info right here.)
So if you're doing your taxes, remember -- lots of credits to try and grab -- not to mention, of course, deductions and exemptions to look into. And if you need help doing your taxes, as you consider whether to go to a tax center or use a tax-preparation software like Turbo Tax, there's also the route of hiring a CPA. If that's the way you go, you can find one near you, at the AICPA's site right here.
Just writing all of this makes me want to start figuring out my own taxes... well, I was going to say now, but I'm thinking yesterday. I need to somehow start doing my taxes yesterday.
Geoff Williams is a frequent contributor to WalletPop. He is also the co-author of the new book Living Well with Bad Credit.