Tax File Guide

By Adrian Sanchez, Columbus Telegram, Neb.
Dec. 2–COLUMBUS — The 2009 tax deadline may be more than four months away, but now is the time to begin looking at ways to reduce the payment to Uncle Sam.

Whether an individual, couple or family itemizes or takes a standard deduction, there are plenty of opportunities to take advantage of a multitude of tax breaks before the end of the year.

Highlighting many new credits and deductions as well as more common but typically overlooked ones, Carrie Resch, Internal Revenue Service (IRS) spokeswoman, discussed how people can retain more of the money they earned, especially during the down economy.

Local automobile dealers reported significant increases in new vehicle sales through the duration of the federal cash for clunkers program and for those new car owners they may qualify for sales and excise tax deduction on their purchase.

Resch reported that the qualifying purchase of the new car, light truck, motor home or motorcycle must have occurred between Feb. 17, 2009, and before the end of the year.

“A person can deduct the taxes paid on up to $49,500 of the (vehicle) purchase price … regardless of whether or not the taxpayer itemizes,” she said, but the deduction begins to phase down for taxpayers with an annual gross income of $125,000 for an individual and $250,000 for those filing jointly.

Many recent home buyers may be aware of the first-time home buyer federal housing tax credit on homes purchased in 2009, but fewer may be familiar with the move-up/repeat home buyer tax credit on homes purchased after Nov. 6.

First-time home buyers may qualify for a tax credit of up to $8,000 while repeat home buyers may qualify for up to $6,500 in tax credits, Resch said.

So for those in the market for a new home, 2009 or early 2010 may be an optimal time to buy, she said.

“One of the most commonly overlooked (tax breaks) out there is the Earned Income Tax Credit (EITC),” she said, for people who work but don’t earn large incomes.

According to the IRS, in the 2008 tax year, nearly 118,000 taxpayers claimed more than $227.5 million through the EITC with the average credit being $1,916.

“Approximately 20-25 percent of people who qualify aren’t taking that credit,” Resch said, and with the changes to the EITC provisions more people than ever may qualify and may not realize.

A few of the income thresholds to qualify are $13,440, $18,440 if filing jointly, without a qualifying child, $35,463, $40,463 if filing jointly, with one qualifying child, and $40,295, $45,295 if filing jointly, with two qualifying children.

Families also may take advantage of the child tax credit, which may equate to as much as $1,000 in tax savings per child, as well as credit for child and dependent care expenses, Resch said.

“One other thing that has been talked about a lot this year are energy efficient home improvements” and related tax incentives, she said.

Not only will qualifying energy efficient water heaters, windows, skylights, doors, roof and other home improvements cut down on energy bills, but they can also result in a tax savings, Resch said.

“Those people might qualify for a tax credit of 30 percent, up to $1,500,” on qualifying improvement projects, she said.

There are many tax savings opportunities made available through the 2009 American Recovery and Reinvestment Act, such as the energy efficiency improvements, that will extend into 2010, she said, so for those who may not be able to take advantage of the opportunity this year, perhaps they may be in a better position to take advantage of them next year.

For students or parents of students, the Hope credit, which an individual could initially qualify for a maximum of two years, has been expanded for up to four years, Resch said.

“One credit that is overlooked a lot is the saver’s (retirement savings contribution) credit for those who don’t earn a large income but are saving for retirement,” she said.

People who were laid off in 2009 may also want to take note of the change in taxation on unemployment compensation.

“Typically, unemployment compensation is considered taxable income,” Resch said. “However, taxpayers do not have to pay tax on the first $2,400 of unemployment compensation, per person, they receive in 2009.”

For those concerned about overlooking a tax credit or deduction, she advises electronic filing because the current tax software will provide all the changes. Another advantage is tax filing and direct deposit will result in a tax refund being received within 10 business days of the filing.

Resch recommended people do some homework and tax planning now.

“Always look at the credits and deductions out there,” she said, because many people “may have ignored many for years because they didn’t qualify.”

For more information, visit www.irs.gov or call 1-800-TAX-FORM (1-800-829-3676).

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Source: Columbus Telegram
Publication date: 2009-12-02

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Copyright (c) 2009, Columbus Telegram, Neb.