The famous stimulus bill that was just signed into law by President Obama contains many tax breaks for individuals. As always, there are phase-outs for high-income taxpayers, but some of the breaks will even help high-income earners. I can't cover all of the provisions in this short space, but I'll cover a few of the bigger incentives.
The famous stimulus bill that was just signed into law by President Obama contains many tax breaks for individuals.
As always, there are phase-outs for high-income taxpayers, but some of the breaks will even help high-income earners. I can't cover all of the provisions in this short space, but I'll cover a few of the bigger incentives.
The most interesting of them is the first-time homebuyers tax credit. It's most interesting because if you bought in 2008, and rushed to get that done for the filing of this year's return, you are not going to feel very good.
Last year, the feds instituted the first-time homebuyers credit for homes purchased after April 8, 2008. That was good news for those who fell into that category - it meant a free $7,500 loan from the government. Those taxpayers will begin repaying it without interest when filing their 2010 tax return over a period of 15 years.
The new credit just signed into law does three things very differently. First, the credit is raised to $8,000. Second, there is no repayment provision. And third, the time frame to purchase the home is extended until Dec. 1.
The real benefit here is the fact that the credit does not have to be repaid. You will owe a portion of the credit back if you sell the home or no longer make the home your primary residence within three years of the date of purchase.
The stimulus bill also includes an expansion of the Hope scholarship credit. It is changed for tax years 2009 and 2010, and it increases the amount of the credit and the eligibility requirements. The maximum credit per student rises from $1,800 to $2,500 and it extends eligibility from the first two years of post secondary school to four years. The full credit is available for single taxpayers making less than $80,000 per year, and gets phased out between $80,000 and $90,000. For married taxpayers who file jointly, the phase-out levels are twice the levels for individuals.
We will also be allowed a deduction for the sales tax paid on the purchase of a new car. The sales tax deduction will be deductible for up to the first $49,500 of the vehicle's purchase price. The deduction will be phased out for single taxpayers with modified adjusted gross income above $125,000 and married filers above $250,000. This is, of course, a nice benefit as long as you can get the car financed or write a check for the purchase.
John P. Napolitano is the CEO of U.S. Wealth Management in Braintree, Mass. He may be reached at firstname.lastname@example.org. For online discussion and more information, go to www.makingcentsblog.com.