7 new tax laws that could save you money
Friday, February 12, 2010
If you're among the 40 percent of taxpayers working on your return this month, here are some tax law changes that could help you maximize your refund. Or at least reduce any amount you might owe Uncle Sam.
1. Home is where the tax heart is
The big break this filing season is the first-time and move-up homebuyer credits. The tax break underwent three revisions in less than two years, but the current incarnation is pretty sweet for many property owners.
Provisions in last year's American Recovery and Reinvestment Act made this a true credit, meaning it can reduce dollar-for-dollar any tax you owe. Better yet, it's a refundable credit so you could get money back from the IRS even if your tax bill is zero, any credit for which you qualify will be sent to you as a refund.And the credit amount was increased under that stimulus measure to $8,000 for first-time buyers.
Nine months later, Congress delivered more homebuyer credit changes. In addition to extending the first-time credit into 2010, lawmakers added a new credit for "long-time" homeowners. Here folks who owned and lived in a residence for at least five consecutive years of the eight years before they buy a new house can claim a $6,500 credit.
There are, of course, income limitations and plenty of other requirements before either first-time or long-term buyers can qualify.
But if you purchased a home last year (or close on one by June 30 of this year) be sure to take a close look at what you might qualify for here and how it could help your 2009 (or 2010) tax bill.
2. Energy improvements, tax savings
Did your new house require a replacement furnace or air conditioning system? I know how costly that can be. But if you bought an Energy Star rated unit, you can claim a $1,500 credit on your tax return.
3. Driving home tax deductions
If in 2009 you bought a new vehicle between Feb. 17 and Dec. 31, you might be able to deduct the sales or excise taxes you paid on your new wheels.
This option is available even to folks who claim the standard deducting. You'll just have to fill out Schedule L to make your claim. Itemizers will still take their deduction on the newly redesigned Schedule A.
Again, there are limits, both to your income and the price of your new car that could reduce you deduction. But for most folks, this could be a nice write-off.
4. Expanded education credit
For 2009 taxes, the Hope Education Credit is replaced by the American Opportunity Credit. The new credit is worth $2,500 per student.
Even better, you can count expenses incurred during the first four years of post-secondary education.
Best of all, up to 40 percent of the credit is refundable, which means you could receive up to $1,000 back from the credit even if you owe no taxes.
5. Unemployment tax relief
If you were out of a job last year and got unemployment benefits, you won't have to pay taxes on as much of those payments.
The first $2,400 in benefits is tax-free.
If, god forbid, both you and your spouse were out of work and getting government help last year, you each can claim the $2,400 for a total of $4,800 in untaxed unemployment earnings in 2009.
6. Helping Haiti and your tax bill
Millions of dollars were donated to help out victims of last month's earthquake in Haiti. If you contributed and itemize, you get the chance to decide whether you want to claim that write-off on your 2009 return or wait until next year when you file your 2010 taxes.
Most of claim the standard deduction. And most years the amount we can claim for our filing status is bumped up at least a little because of inflation.
For 2009 returns the standard deduction amounts are
- $11,400 for married couples filing a joint return and qualifying widows and widowers,
- $5,700 for singles and married individuals filing separate returns, and
- $8,350 for heads of household.
Note: Higher amounts apply to blind people and senior citizens. However, the standard deduction is usually cut a bit if you file but also can be counted as another taxpayer's dependent.
But thanks to law changes over the last couple of years, the standard deduction amounts aren't so standard any more. Many folks will be able to increase their standard claim amount by adding in some other items:
- State or local real estate taxes ($500 for single filers, $1,000 for joint filers),
- State or local sales or excise taxes paid on that new vehicle purchase mentioned earlier, and
- Net disaster losses reported on Form 4684.
But here's what is new for 2009 filings. To boost your standard claim with any (or all) of these items, you'll need to file the new Schedule L.
More tax saving moves: These are just seven of the ways that new tax laws could cut your IRS bill. I discuss a couple more in my Bankrate story on new tax laws to know, as well as look at old tax laws that have new amounts for 2009 returns.
Over at that Web site, I also look a more closely at claiming the Making Work Pay credit. You're right; you got this money in your paycheck via reduced withholding. But you'll still have to do some extra filing work (the new Schedule M and it's already caused some confusion) in connection with this new tax break.
Yep, this filing season might require a bit more homework before you tackle your 1040. But as you can see, it could pay off with a smaller tax bill.Related posts:
- House hunting? Check out tax credit
- The 12 Tax Tips of Christmas: #2 Improve your home
- Road ending for auto deduction
- Yes, Virginia, there is an election day
- Unemployment's terrible tax surprise
- Final word on Haiti donation deductions
- Discovering ARRA tax breaks
- Schedule L, a new form for nonitemizers
- Schedule M, yet another new form
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I think we can save alot of money because of these new tex laws, we just need to play smart to stay in the market.
Posted by: nurses continuing education | Wednesday, February 01, 2012 at 04:47 AM
Thanks for the post. There are so many changes in tax law it is hard to keep up with it. This will definitely help people save money this year.
Posted by: The Tax Club | Monday, March 08, 2010 at 08:19 AM
That's good news. It will help lots of people that have their problems on tax and money.
Posted by: tax services philippines | Tuesday, February 23, 2010 at 11:48 PM