(NewsUSA) – The American Recovery & Reinvestment Act will benefit millions of workers, homeowners, college students and vehicle owners through new and expanded credits and deductions. The Act was created to give a tax break to 95 percent of taxpayers, with some families potentially saving more than $13,000.
The Making Work Pay Credit is equal to 6.2 percent of your earned income, up to $400 for individuals and $800 for joint filers in 2009 and 2010. It starts phasing out at $75,000 for individuals and $150,000 for joint filers, and is reduced by the Economic Recovery Payment and Government Retiree Credit.
The credit should be figured using Schedule M and recorded on Form 1040, 1040A or 1040EZ.
The First-Time Homebuyer Credit is for homeowners who did not own a principal residence during the past three years before closing before Dec. 1, 2009. It’s 10 percent of the purchase price, up to $4,000 for individuals and $8,000 for individual or joint filers, and phases out at higher income levels. Different rules apply to homes purchased in 2008, but the credit for purchases in 2009 doesn’t have to be repaid unless it ceases to be the primary residence within three years of closing.
It can be claimed on Form 5405 on either a 2008 or 2009 return.
Certain energy efficient improvements are worth up to $1,500 for homeowners through The Nonbusiness Energy Property Credit and Residential Energy Efficient Property Credit. The credits provide up to 30 percent of related expenditures.
Both credits should be claimed on Form 5695.
The HOPE credit is now called the American Opportunity Credit and is worth up to $2,500 per student for tuition, related fees and required course materials in 2009 and 2010. It phases out at a modified adjusted gross income of $80,000 for individuals and $160,000 for joint filers. Form 8863 must be filed to claim this credit.
State or local sales or excise taxes paid on qualifying new vehicles purchased after Feb. 16, 2009, and before Jan. 1, 2010, may be deductible. It’s limited to the tax on up to $49,500 of the purchase price and phases out at income levels of $125,000 for individuals and $250,000 for joint filers. The deduction should be recorded on either Schedule A or L.
“Many credits are available for a limited time, so do your tax planning early,” advises Jessi Dolmage, spokeswoman for 2nd Story Software, Inc., makers of TaxACT. She also recommends:
1. Using TaxACT 2009 Free Federal Edition to see how the ARRA will affect your bottom line. Start your free federal return at www.TaxACT.com.
2. Reviewing your withholding. The Making Work Pay Credit is being distributed through decreased federal withholding, so having too little tax withheld may result in a smaller refund or more taxes owed.
3. Learning more about the ARRA at www.IRS.gov/recovery and www.TaxACT.com/recovery-act.
