CHARLESTON -- April 15 came and went. After fulfilling our mandatory civic duty of writing a check to the Internal Revenue Service, most of us do not want to think of April 15 until next year.
Because of this, we sometimes miss tax breaks and opportunities due to lack of planning. The American Recovery and Reinvestment Act of 2009 was signed by President Obama on Feb. 19. The $787 billion package is divided into two parts: Nearly $500 billion will go toward spending with a portion distributed to federal agencies and state government projects and programs; about $280 billion goes to tax relief.
The following are selected highlights of the 2009 stimulus package:
Work Opportunity Tax Credit: This tax credit is available to businesses that hire workers belonging to any of 12 targeted groups, including unemployed veterans and disconnected youth. The credit can potentially be as much as $9,000 per hire. Businesses planning to claim this newly-expanded tax credit have until August 17th to request the certification required for these workers hired during the first part of 2009.
Residential Energy Credit: The new law brings back the energy tax credit for homeowners who make energy-efficient improvements to their existing homes. The new law increases the credit rate to 30% of the cost of all qualifying improvements and raises the maximum credit to $1,500. The credit applies to improvement such as insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning.
First-Time Homebuyer Credit: First-time homebuyers who purchase a principal residence in 2009 can get a tax credit up to $8,000 with no payback to the IRS (as required under the old law). The credit will begin to phase out for individual taxpayers with adjusted gross income exceeding $75,000, or $150,000 for married couples filing jointly.
New Car Deduction: Purchasers of certain new vehicles are allowed for the rest of 2009 an above-the-line deduction for state and local sales taxes or excise taxes paid, up to $49,500 of the purchase price. A qualifying vehicle generally includes a new car, SUV, light truck or motorcycle that weighs no more than 8,500 gross pounds. Motor homes also qualify. The deduction will begin to phase out for individual taxpayers with adjusted gross income exceeding $125,000, or $250,000 for married couples filing jointly.
Education Credit: The new law renames the existing HOPE education credit the "American Opportunity Tax Credit." Under the new credit, a maximum $2,500 per year would be allowed on $4,000 in qualifying payments (100 percent of the first $2,000 and 25 percent of the next $2,000). The new credit applies to all four years of college and adds course materials to qualifying expenses.
Qualified Tuition Programs: The new law allows beneficiaries of qualified tuition programs (a.k.a."529 plans") to use tax-free distributions to pay for computers and computer technology, including internet access.
These are a few of the provisions contained in the 2009 stimulus package. Many more can be found on our web site at wnacpas.com.
Nistendirk is a partner at Woomer, Nistendirk & Associates PLLC, a CPA firm located in Charleston. Bob has extensive experience in tax accounting, strategic planning and financial/business consulting. He can be contacted at rnistendirk@wnacpas.com.