Each year at this time people are busy gathering their records to prepare yet another income tax return. This year (2009) in particular, there are a number of specific items taxpayers should check into to be sure they are taking advantage of all available credits and paying the lowest allowable tax. Since the issues are too complex to explain in a short blog, I have listed the items in bullet form with a link to the IRS page where you can find more information:
- First Time Homebuyer Credit - This credit provides up to $8,000 for first time homebuyers and up to $6,500 for "long time residents." Long time residents must have lived in their home for five of the last eight years and then purchase a new principal residence. The provisions for this credit can be complicated and need to be well-documented in order to claim the credit.
To find out more, go to: http://www.irs.gov/newsroom/article/0,,id=215791,00.html.
- Earned Income Credit - The Earned Income Tax Credit is a tax credit for people who earned less than $48,000. The credit is "refundable," meaning that even people who do not owe taxes can have the credit returned to them in a refund.
To find out more, go to: http://www.irs.gov/individuals/article/0,,id=96406,00.html.
- Expansions to the Hope Credit for Education - Called the American Opportunity Credit, this allows a credit based on the cost of qualified tuition and related expenses. The expansion provides an increase of $700 beyond the Hope Credit. More types of expenses are now allowable, including books, supplies, and required equipment. The credit is "refundable," meaning that even people who do not owe taxes can have part of the credit returned to them in a refund.
To find out more, go to: http://www.irs.gov/newsroom/article/0,,id=205674,00.html.
- Making Work Pay Tax Credit - Generally, this provision of the American Recovery and Reinvestment Act provides a $400 tax credit for working taxpayers. For most people this credit was handled through automatic withholding adjustments made by their employers. However, if you received less than your full amount through withholding, you can claim the difference on your tax return. And if the adjustments caused too little income to be withheld, you might find that you owe a small amount when you file your taxes this year.
To find out more, go to: http://www.irs.gov/newsroom/article/0,,id=204447,00.html.
Tune in next week for installment #2 of "Tax Tips."