Written by Hillsboro Free Press Tuesday, 02 March 2010 19:54
More people are looking forward to tax time this year. More than 25 tax cuts for 2009 federal returns have been passed to help those struggling in the downturned economy. Many states are also offering tax breaks this year.
“Virtually everyone is eligible for new tax credits, deductions and other changes on their federal tax returns,” says Jessi Dolmage, spokeswoman for 2nd Story Software Inc., makers of TaxACT. Dolmage summarizes seven changes that could impact your bottom line.
The Making Work Pay credit replaced the 2008 federal stimulus checks for 2009 and 2010. The refundable credit is worth 6.2 percent of your earned income, up to $400 for individuals and $800 for married couples filing jointly.
The credit phases out for married couples filing jointly with a modified adjusted gross income (MAGI) between $150,000 and $190,000, and for single taxpayers whose MAGI is between $75,000 and $95,000.
Most taxpayers already received the credit for 2009 through reduced federal withholding starting in April 2009, resulting in an increase of $10 to $13 per paycheck.
Even if you received the credit in your paychecks, you generally still need to claim the credit on your federal return to make up for the reduced withholding throughout the year. If you don't withhold federal taxes, you must file a return to receive the credit.
If you received the one-time economic recovery payment or qualify for the Government Retiree Credit, the amount must be subtracted from any Making Work Pay credit amount. TaxACT's Making Work Pay Calculator (taxact.com/recovery-act) can estimate your credit amount.
For the 2009 tax year, your standard deduction may also include state or local real estate taxes of up to $500 ($1,000 for married filing jointly) and net disaster losses that occurred before Jan. 1, 2010.
The first $2,400 of unemployment compensation is exempt from 2009 federal taxes. Any amount over $2,400, as well as severance pay, is taxable income.
If you purchased a home in 2009, you may qualify for the first-time homebuyer credit. Keep in mind the name of the credit is deceiving, as current and past homeowners may also qualify.
The credit is equal to 10 percent of the purchase price, up to either $6,500 or $8,000, depending on the purchase date, price, whether you've owned a primary residence and when you last owned a primary residence. Income level and filing status also affect eligibility.
Those claiming the credit must mail their federal returns along with certain documentation for the home.
Energy efficient improvements made in 2009 and 2010 may give homeowners up to $1,500 through the Nonbusiness Energy Property Credit. Up to 30 percent of the costs for qualifying improvements to a primary residence can be claimed.
The modified HOPE credit, the American Opportunity Credit, is equal to 100 percent of the first $2,000 and 25 percent of the next $2,000 (totaling up to $2,500 per student) for tuition, related fees and required course materials. It applies to the first four years of post-secondary education in 2009 and 2010.
The refundable credit phases out at MAGIs of $80,000 for individuals and $160,000 for joint filers.
Finally, if you made a cash contribution toward earthquake relief efforts in Haiti after Jan. 11, 2010, and before March 1, 2010, you can deduct it on your 2009 or 2010 return (but not both). To ensure you get all the tax breaks you qualify for, Dolmage recommends a do-it-yourself tax solution like TaxACT that includes a maximum refund pledge.
The program will break down all the tax law changes in an easy-to-understand and easy-to-follow format and point out potential deductions and credits you may overlook on your own. TaxACT users can e-file their federal return free, so they can have their refund in as few as 8 days with direct deposit.
For information about all 2009 tax law changes, visit www.IRS.gov and www.TaxACT.com/recovery-act.
—Courtesy of ARAcontent