by Bryan Miller, Senior Tax Analyst
The American Recovery and Reinvestment Act (ARRA) of 2009 put into place many deductions for the individual taxpayer that should be taken advantage of prior to the end of year 2010. This is part of an overall plan by our government to strengthen and rebuild the economy, but it translates into lower taxable income for you. Some of the benefits may be obvious if you participated in a program to receive a specific tax benefit, but some of the credits and deductions are not as obvious. This is part of an overall plan by our government to strengthen and rebuild the economy. To ensure you have planned and positioned yourself for the best available deductions and credits, here is a rundown checklist:
Homebuyer Credit One of the more obvious deductions, but you should remember the date was pushed back this year. If you purchased and closed on your home by September 30, 2010, you may be eligible for up to an $8,000.00 tax credit. The home must be your primary residence, and the have rules changed for each tax year since 2008, in case you are filing or amending any of your past 3 years returns. Documentation requirements apply for any year, and you will need to file a paper return rather than e-file along with Form 5405.
See http://www.irs.gov/newsroom/article/0,,id=204671,00.html for all the details.
COBRA Individuals who involuntarily lost their jobs between September 1st, 2008 and May 31st, 2010 may be able to reduce the cost of COBRA health insurance premiums.
Energy Star Credits 30% of the cost of qualified Energy Star products may be taken as a tax credit up to $1,500.00. For example, if you purchased and installed a qualifying Energy Star product by December 31st, 2010 that costs $5,000.00, you may receive the full $1,500.00 credit ($5000 x .30% = $1500) on your return! Not all Energy Star products qualify. The credit applies mainly to HVAC, insulation, roofing, heating and cooling systems, windows and doors, as well as some appliances and alternative energy systems. See the Energy Star website for a full list and description.
Earned Income Tax Credit This credit has been a staple for many households to help make ends meet, and is bigger for tax year 2010. Also, more families will qualify for the Additional Child Tax Credit since earned income is set at only $3,000.00. The minimum earned income was slated to be $12,550.00 before the American Recovery and Reinvestment Act (ARRA), but was subsequently lowered. This credit may apply even if no tax is due – which would result in a refund for the taxpayer. See the IRS website or your tax professional for advice on this additional child tax credit.
Making Work Pay Tax Credit What was meant to be a blessing has for some turned out to be a curse. This credit allowed taxpayers to take more pay home out of their checks by adjusting the tax withholding downward. You won’t need to adjust this yourself; Uncle Sam took care of this for you. There are some people who may find themselves negatively affected by this credit. Some taxpayers may find out they did not have enough income tax withheld. This may result in a smaller refund, or they may owe this coming tax season. Taxpayers who may have been affected include: married couples with two incomes, individuals with multiple jobs, social security beneficiaries who work, dependents, undocumented workers and pensioners. You can check your 2010 withholding and adjust it accordingly using the IRS withholding calculator.
$250 for Social Security Recipients, Veterans and Railroad Retirees – Call 1-866-234-2942 and select option #1, or visit Did I receive a 2009 Economic Recovery Payment?
Unemployment Benefits – The first $2,400.00 of unemployment benefits will be excluded from income in tax year 2010. Be sure to check your withholding.
Money Back for New Vehicles and Increased Transportation Subsidy - These are leftovers from 2009 purchases of certain vehicles, or an increase of employer-provided commuter highway vehicle benefits for mileage and parking. See page 2 of Publication 15-T for more details.
Be sure to check for any carryover items from previous tax years that may benefit you in this tax year. And for a more broad scope of how the IRS is utilizing your money to recover the economy on both a national and local level, visit http://www.whitehouse.gov/recovery or http://www.recovery.gov/Pages/default.aspx.