Wednesday, February 25, 2009

IRS Outlines Tax Savings

The IRS Spokeswoman, Sue Hales, recently explained the some new tax credits in an article on the Daily Journal. You can find a clip of the article below, but the full post can be found here.

Housing Credits

The America Recovery and Reinvestment Act, which Obama recently signed into law, will affect 2009 tax returns more than 2008, Hales said, but it does include a new deduction for first-time homebuyers that can be applied this tax season. Additional real estate tax deductions of up to $500 for singles and $1,000 for married couples are available for those who file standard deductions.

Disaster Relief Credits

Net losses suffered in federally declared disasters can be deducted on tax filings.

Additional relief is being offered for victims of federally declared disasters in the Midwest that occurred between May 20 and July 31, 2008.

Qualified disaster victims can deduct casualty and theft losses without subtracting $100 plus 10 percent of adjusted gross income from that amount.

Income Tax Credit

Earned income tax credit, a refundable credit for eligible low- to moderate-income individuals, has increased to $4,824 for families with two or more children; $2,917 for families with one child; and $438 for individuals between 25 and 64 years old who have no children. If the income tax credit amount exceeds taxes owed, the difference will be refunded to the taxpayer.

Free tax filing through the IRS is available for those with a 2008 adjusted gross income of $56,000 or less. The program, available through the IRS Web site, has 20 participating tax companies, and three offer service in Spanish.

"We encourage people to e-file. There are many benefits for people to e-file," Hales said. "You can request to have it deposited in a bank account, and receive it in 10 days or less, which is much faster than mail. E-filing is far more accurate than paper filing. The error rate on e-file returns is usually less than 1 percent. The error rate on paper returns is around 20 percent."

A recovery rebate credit -- an extension of last year's stimulus payment -- is available to eligible taxpayers. Hales noted that the stimulus payment is not taxable or deductible, and only used to determine if an individual will receive a recovery rebate credit, and what amount it will be.

"Most will not be eligible for the recovery rebate credit this year," Hales said. "But if you did not receive the maximum (stimulus) amount for your financial situation last year, if your income changed in 2008, if you could be claimed as dependent in 2007 but not in 2008, or if you adopted a child in 2008, then you are eligible for recovery rebate credit."

Blog Archive