Following along the theme of my last blog, here are some more tax deductions, credits, and incentives for your 2009 tax returns.You may also find it helpful to download our tax organizer for 2009
New Vehicle Purchase Incentive. New car buyers can deduct state or local sales or excise taxes paid on the purchase of new cars, light trucks, motor homes and motorcycles. The deduction is limited to the tax on up to $49,500 of the purchase price of each qualifying new vehicle purchased after Feb. 16, 2009, and before Jan. 1, 2010, and is subject to income phaseouts based on filing status. Individuals who itemize and those who take the standard deduction can benefit. In states without a sales tax, other taxes or fees can qualify if they are assessed on the purchase of the vehicle and are based on the vehicle’s sales price or as a per unit fee.
Cash for Clunkers A $3,500 or $4,500 voucher or payment made for such a voucher under the CARS “cash for clunkers” program is not taxable to the consumer buying or leasing a new car.
Tax Credits Increased for Low and Moderate Income Workers. The Earned Income Tax Credit (EITC) is now available for those with three or more qualifying children and married couples. The EITC helps taxpayers whose incomes are below certain income thresholds. The EITC, which, unlike most tax breaks, is refundable, meaning that individuals can get it even if they owe no tax and even if no tax is withheld from their paychecks.
Standard Deduction Increases for Most Tax-payers. Nearly two out of three taxpayers choose to take the standard deduction rather than itemizing deductions such as mortgage interest and charitable contributions. Eligible taxpayers can further increase their standard deduction by state or local real estate taxes paid in 2009, a net disaster loss reported, and state or local sales or excise taxes on the purchase of a qualifying new motor vehicle.
Making Work Pay Credit. Many taxpayers will qualify for the maximum credit of $800 for joint return filers ($400 for others). The credit equals 6.2 percent of earned income up to the maximum amount. For most, the credit is based on the taxable wages reported on Forms W-2. Self-employed individuals figure the credit using net profit or loss. Additional calculations apply to some taxpayers, including those with net business losses or foreign earned income. Not everyone is eligible, such as those whose income is above certain thresholds, those without valid Social Security numbers, and nonresident aliens. A reduced credit applies to those who received a $250 economic recovery payment made in 2009, and who claim the government retiree credit.
Although all eligible taxpayers must file Schedule M to claim the credit, most got the benefit of this credit through larger paychecks, reflecting reduced federal income tax with-holding during 2009. However, since the adjustments to the withholding tables may have caused millions of taxpayers to be under withheld, IRS will waive the penalty for an under payment of personal income tax caused by adjustments made to the income tax withholding tables after enactment of the Making Work Pay Credit.
Government Retiree Credit. This credit is designed to provide a benefit equivalent to the economic recovery payment to those government retirees who did not qualify for these payments. Retired federal, state or local government employees who receive pensions in 2009, based on work not covered by Social Security, are eligible to claim this credit. The credit is $250. The credit can’t be claimed by anyone who received the $250 economic recovery payment during 2009.