Copyright 2010 TheStreet.com, Inc.All Rights Reserved
February 8, 2010 Monday 05:00 AM EST
SECTION: PERSONAL FINANCE; Taxes
LENGTH: 638 words
HEADLINE: Tax Changes That Could Boost Your Return
BYLINE: Joe Mont
WASHINGTON (TheStreet) — As taxpayers work on their 2009 returns, a number of new and increased deductions may make the process a little more bearable. Here are some tax changes that could impact what you owe or get back this year: Going green Environmentally conscious folks will want to make sure they have a copy of the Internal Revenue Service’s Form 5695 in hand when they crunch out their taxes. The costs of several “green” efforts can be deducted this year as part of the government’s plan to stimulate the economy. Homeowners who install energy efficient windows, doors, furnaces, central air conditioners and water pumps can receive up to a 30% tax credit (capped at $1,500).Alternative energy technology can also earn tax credits, starting this year and through 2016. Up to 30% of the cost of solar water heaters and panels, wind energy and geothermal heat pumps is deductible. Numerous energy-efficient appliances are also eligible for a range of tax rebates. Hitting the books The American Opportunity Credit, available for 2009 and 2010 tax filings, allows people to deduct education expenses such as tuition, fees and books. The credit reimburses the first $2,000 spent and 25% of the next $2,000 for taxpayers whose modified adjusted gross income is $80,000 or less ($160,000 for joint filers).The tax benefit scales back as the filer’s income rises above the threshold. The credit is reduced or eliminated for taxpayers with incomes above these levels and is only available during the first four years of college. Beyond ‘Clunkers’ If you buy an electric car, you can claim a credit that ranges from $2,500 to $7,500. A scaled deduction is also in place to subsidize the juice needed to recharge these vehicles. Cars running on natural gas, liquefied petroleum or 85% methanol alcohol also qualify for a variety of credits.The current year is the last for tax breaks of up to $2,400 offered for hybrid-car purchases. The deduction was designed to expire after a carmaker sells at least 60,000 of these vehicles, meaning that incentives for models by Toyota(TM:NYSE), Ford(F:NYSE) and Honda(HMC:NYSE) are either no longer available or being phased out. Among the brands still earning a credit: Chevrolet, Dodge, GMC, Nissan(NSNAY:OTC) and Saturn. Making Work Pay The Making Work Pay credit, part of the 2009 stimulus package, offered a tax break equal to 6.2% of pay, up to $400 for a single taxpayer and $800 for joint filers. It phases out as adjusted gross incomes exceed $75,000 ($150,000 for joint filers).The credit is often overlooked because it was added to paychecks starting in April. Those who earned more than the income limit must ensure the credit wasn’t incorrectly applied and pay it back if it was. Conversely, self-employed workers should calculate and claim the credit on their filings. The IRS Schedule M is needed to correct discrepancies. Dependents The deduction allowed for each dependent has increased by $150 to $3,650. For noncustodial parents to claim a child as a dependent, they must submit a new document, the Form 8332, instead of the traditional attachments from a divorce decree or separation agreement. Unemployment Unemployed workers don’t have to pay taxes on the first $2,400 in jobless benefits they collect, but they must pay taxes on additional funds. Refunds To promote savings and bolster retirement funds, the government has made it easier to buy saving bonds with tax refunds.For the first time, the IRS will facilitate the purchase of up to $5,000 in interest-bearing Treasury I bonds. To take advantage, use Form 8888, fill in “043736881” as the routing number, check the “savings” box and write “BONDS” in the space for an account number. Bonds are available in $50 increments and an account must be listed for the deposit of the remaining refund.— Reported by Joe Mont in Boston.
LOAD-DATE: February 9, 2010