Tax Credits: They’re the Least You Can Do

Tax credits help you do your part for the ecomony

It’s time to file tax returns and as part of the stimulus bill the IRS is offering some new credits that could save you big money. Naturally, you the taxpayer are supposed to do your part for the “greater good” — not just of the United States but of all mankind — by spending the tax dollars you “save” out there in “our struggling economy” on “consumer goods” you don’t really need.

Or not

If, however, you’re sick and tired of that propaganda, perhaps you can simply use the money for day-to-day living expenses. Perhaps, if you qualify for a couple of these credits, you’ll be spared having to take out more secured loans or unsecured loans for quick cash just to tide you over between paychecks.

Five new tax credits

In either event, here’s the line-up: five money-savers to keep in mind when you file for 2009.

Homebuyer credits. Deadlines for home-buyer credits have been extended to include homes purchased by April 30, 2010. Qualified first-time home buyers can claim credits of up to $8,000 and repeat buyers who have lived in their present homes for at least five years can claim credits of up to $6,500. Income limits for the homebuyer credits have been raised. If your modified adjusted gross income is $125,000 or less, you may be eligible for the full amount of the credit. If your income is between $125,000 and $145,000 you may qualify for some reduced portion of the credit. Even if you’ve already filed your 2009 return, if you close on a house by April 30, you can amend it to claim the credit.

American Opportunity Credit. To lighten the burden of skyrocketing tuition costs, the IRS is offering a credit for college tuition, text books, computers and other educational expenses. The credit, which temporarily replaces the Hope Credit, can be claimed for the tax year 2009 or 2010 whether or not you owe taxes. Taxpayers with incomes of $80,000 or less may qualify for a credit of up to $2,500 a year. The credit can now be claimed for four years of post-secondary schooling, not just two.

Residential Energy Property Credit. This credit is designed to motivate homeowners to make energy-saving upgrades. The credit was originally supposed to expire in 2007, but has been extended through 2010. Under the new law, taxpayers can claim up to 30% of certain home-improvement costs. The maximum credit for improvements made in 2009 and 2010 has been increased to $1,500. Improvements qualifying for the credit include insulation, energy-saving windows, and high-efficiency heating and air-conditioning systems.

Making Work Pay Credit. This credit provides up to $400 for single persons with incomes of $75,000 or less, and up to $800 for joint filers with combined incomes of $150,000 or less. Most people will have already received the credit in their wages because of adjustments to their income-tax withholdings, but they still need to claim the credit in order not to end up owing the money back.

Vehicle Credits. On your 2009 return, you can deduct state and local taxes paid on new vehicles purchased between Feb. 17 and December 31, 2009. Qualifying vehicles include passenger automobiles, motorcycles, motor homes, and trucks weighing less than 8,500 pounds. The deduction is available for taxes and fees paid on a purchase price of up to $49,500. If you bought a car that time frame under the Cash for Clunkers program, you stand to save again with a vehicle credit.

In an effort to encourage car buyers to conserve energy, the IRS is also offering a new credit of up to $7,500 for certain electric plug-in vehicles purchased after Dec. 31, 2009. And don’t forget the other tax credit for buying hybrid and other low-emissions vehicles that has been offered since 2005.