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Tax season is in full swing, but some taxpayers may not be aware of some changes for this season. There are new tax credits, as well as extensions of previous credits taxpayers need to consider.
This year, there are several changes to the tax laws that taxpayers should be aware of in preparing for the upcoming filing season, including new credits to be aware of as well as extensions of previous credits that the taxpayer may qualify for.
One credit likely to benefit a large pool of taxpayers is the First-Time Homebuyer's Credit for qualified buyers. For those taxpayers who purchased a home between April 8, 2008 and Dec. 31, 2008, the credit provides 10% of the purchase price of a new home, up to a refundable credit of $7,500. This credit is basically a zero interest loan, as it must be repaid over 15 years starting two years after the year in which the credit is claimed. If the maximum credit of $7,500 is claimed, repayment would be an additional tax of $500 each year when the return is filed.
However, qualifying taxpayers who purchase a home between Jan. 1, 2009 and Dec. 1, 2009 can get up to an $8,000 tax credit and not have to pay it back as long as the home remains their main home for 36 months after the purchase date. The credit can be claimed on either the 2008 or 2009 tax return.
There is still also a tax credit available on certain hybrid vehicles. A qualifying hybrid vehicle must have been purchased by December 31, 2008 to receive a tax credit. This credit is only allowed on a certain number of hybrid vehicles produced by each manufacturer. More information is available on the credit at http://www.irs.gov/newsroom/article/0,,id=157632,00.html.
This past October 2008, President Bush signed into law the Emergency Economic Stabilization Act of 2008, which contained more than 100 tax provisions worth over $150 billion in tax benefits. Included in the Act are:
* Another AMT patch to protect middle class taxpayers from paying the Alternative Minimum Tax or AMT, a tax originally intended for those who were not paying any income tax due to large write-offs or exempt interest income.
* Popular tax breaks for education, such as the $250 deduction for teachers who buy out-of-pocket classroom supplies, as well as the Tuition and Fees deduction for eligible taxpayers with higher education expenses.
* The option to deduct state and local sales taxes rather than just state income tax. This benefits taxpayers living in states where there is no state income tax (Florida, Texas, Alaska, Nevada, South Dakota, Washington and Wyoming).
* The option for IRA owners who have reached 70 ? and must begin withdrawing money from their retirement accounts allowing them to contribute up to $100,000 tax free to charity.
It is very important for taxpayers to be aware of the changes Congress makes year to year to the tax code. For many taxpayers, it is best to seek professional assistance to insure they are not missing out on any deductions or credits they might be entitled to.
Taxpayers can find more information on a larger range of tax changes for individuals at http://www.irs.gov/formspubs/content/0,,id=178012,00.html.
Copyright 2009 JK Harris and Company
Peter Hukki, an Enrolled Agent of 34 years, works for JK Harris and Company, the nation's largest tax representation firm, assisting taxpayers with their IRS tax problems. For more information, go to www.jkharris.com.
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