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2009 ECONOMIC STIMULUS RECOVERY ACT OUR
2009 Congressional legislation to-date has produced one set of the
very most lengthy and far-reaching Federal Tax and Revenue packages on
record! Below are
information highlights concerning the most popular Income Tax provisions
that could affect the highest proportion of taxpayers for 2009 and
beyond…
MAKING
WORK PAY CREDIT
Those
extra dollars you have been receiving in your pay or retirement check are
being facilitated by the introduction of new Tax Form Schedule M, the
“Making Work Pay Credit”. Schedule
M will be used on your 2009 Income Tax return. The
initial intent of Schedule M is to help balance the negative tax effects
of less Federal tax withholding on your wages or retirement.
Remember, your checks are made higher by less tax withheld;
i.e. an advance against your tax deposits for 2009.
This was done to provide more cash to spend now to stimulate the
economy. The
lower withholding makes for a lower Refund or higher Balance Due at tax
time if nothing else was done! Schedule
M helps address this for some taxpayers by providing up to $ 400. Credit
($800. if Married-Filing Joint) maximum.
The Schedule M credit phases out if your income rises above $
75,000 ($150,000 if MFJ). Taxpayers
in “special” situations where multiple employers/payers exist must
resolve any expected withholding shortfalls by adjusting withholding or
making Estimated payments to help avoid Underpayment penalties in which
they will be liable for under the rules in place.
Dependents of a filing taxpayer and non-resident aliens are not
eligible to file Schedule M. TAXPAYER
TIP: Make
sure you recognize that the change in withholding will affect you
negatively if you fall in one of these “special” situations. 1ST
TIME HOMEBUYER ENHANCED CREDIT
In
tax year 2008 1st time homebuyers, defined as those who have
not had an ownership interest in a residence in at least 3 years, receive
a credit of 10% of up to $ 75,000 of Purchase Price; a maximum of $ 7,500.
This credit must be repaid, starting in 2010 taxes in installments
for fifteen years. For
2009, this credit was increased to $ 8,000.
More importantly, those lucky enough to close in 2009 do not
have to pay this credit back if they live in the house for more than
thirty-six months. If
you have not closed yet when you read this, you have until November 30 to
do so. This credit phases out
if your income for 2009 is above $ 75,000 ($ 150,000 if MFJ).
After you close you can either amend your 2008 taxes or wait until
2009 taxes to file for the credit. CASH FOR
CLUNKERS AUTOMOBILES
Car
buyers have until November 1, 2009 to participate in the Cash For Clunkers
program. Not truly a
tax incentive as more of a Purchase Price rebate paid by the federal
government, if you purchase or lease a new vehicle while trading in your
older vehicle that was fuel economy rated at less than 18 mpg, is less
than 25 years old and in running condition, your dealer will apply for
your rebate voucher of up to $ 4,500.
This is a tax-free voucher with a limit of one per customer.
You will receive the rebate sometime after the purchase. SALES
TAX DEDUCTION FOR NEW VEHICLE PURCHASE While
on the new vehicle subject, if you purchase (not lease) that new vehicle
(not used) in 2009, you can additionally deduct the sales tax paid as a
direct income reduction without needing to qualify for Itemizing
Deductions. The income
phase out of this deduction starts at $ 125,000 for non-married filers and
$ 250,000 for MFJ. HOME
IMPROVEMENT ENERGY CREDITS There
are renewed tax credits for 2009 and 2010 if homeowners make certain
energy efficient home improvements.
There is a list of improvements that, combined, provide up to $
3,000 in credits, based on 30% of the cost of such items.
The list includes: new windows, furnace, insulation, exterior
doors, biomass furnaces, hi-efficient heat pumps, air-conditioning, water
heaters and metal roofs. EDUCATION
CREDITS The
HOPE credit has again been enhanced for 2009.
The number of years of eligible HOPE credits has increased to the
first 4 years of undergraduate postsecondary enrollment, with an annual
credit cap now of $ 2,500. Additionally
up to 40% of your credit, a maximum of $ 1,000, could be a Refundable
credit even if you have no other tax liability.
Also, for the first time, costs for “course materials” can be
utilized as part of this credit.
Course materials mean books, equipment and supplies normally used
in the curriculum and not necessarily purchased as a condition of
enrollment. AMT
PATCH FOR 2009 The
Alternative Minimum Tax patch that reactivates blocks to additional taxes
under the AMT program have already been put in place for 2009.
This means that the indexing that is present within the AMT
calculations that penalizes more taxpayers with each passing year due to
inflationary pressures on income should not affect most “first timers”
whose incomes achieve the minimum limits for such AMT penalties.
If you were not affected by the AMT in 2008, and if your income has
not risen dramatically, you should not be affected in 2009. The AMT patch remains an each year patch, meaning that 2010 will again start a new concern for those whose income approaches such penalties, unless Congress again provides for such a contingency.
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MAKING WORK PAY
CREDIT – SCHEDULE M