Take Advantage of New Tax Provisions for 2009

Date March 1, 2010

tax time! The Olympics are over and the U.S. won a record 37 medals! Now that we’re done spending our weekends watching the Olympics, it’s time to think about filing our taxes. At least, in my house it is.

As it happens each year, there are several new tax provisions in California, and probably in other States as well. Here are some of the new provisions for you to be aware of:

  • First-time homebuyer credit – I discussed this in a previous post, but you still have until April 30th to use the credit if you’re a first-time homebuyer.
  • Retirement plan distributions – if you are at least 70 1/2 years old, you are normally required to take a mandatory annual distribution from your traditional IRA or 401k (talk to your tax advisor to see if this applies to you). Retirees who ignore the annual distributions usually run a big risk — in the form of a 50% excise tax on the amount they should have withdrawn. However, for 2009, you are not required to take the distribution. Why? So Wall Street will have more money to work with should the market rebound.
  • Unemployment compensation – if you are unemployed and collecting from the government – good news. The first $2,400 you received in 2009 is tax-free.
  • American Opportunity Tax credit – Under the American Recovery and Reinvestment Act (ARRA), more parents and students will qualify over the next two years for a tax credit, the American Opportunity Credit, to pay for college expenses. The new credit modifies the existing Hope Credit for tax years 2009 and 2010, making the Hope Credit available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. Many of those eligible will qualify for the maximum annual credit of $2,500 per student. The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return.
  • Making Work Pay credit – This is an easy tax credit so be sure to alert your tax preparer. If you earned income in 2009, you get a $400 credit, and $800 if you are filing jointly. There are some exceptions so I recommend you check this out.

 There are several other new tax provisions for 2009 so be sure to check with your tax preparer to make sure you get the benefit of all that you are eligible for.

So what’s your plan to attack your taxes this year? Are you using TurboTax or H&R Block’s online tax product (if you click the graphic at the top of this post you can save!)? Or do you have boxes filled with receipts that you still need to get to your accountant? Whatever you do, make sure you don’t delay and get your taxes mailed or filed by April 15th!

And don’t forget to have your return (if you’re lucky enough to get one!) directly deposited into your bank or credit union account! If you’re a MCCU call us to find out how!

Questions or comments? E-mail me at blogger@matadorsmoneymatters.com.

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