Several tax facts about the American Opportunity Tax Credit

The new American Opportunity Tax Credit provides many benefits. One of the benefits of the credit is that many taxpayers will be able to apply the cost of qualified educational expenses at a qualified educational institution for the next two years under the American Opportunity Tax Credit. In addition, the credit is a refundable credit which means that even if the taxpayer has no tax liability, they may qualify to receive cash back. Below are several important tax tips about the American Opportunity Tax Credit.
1. The full credit is limited to $2,500. This is broken down by first $2,000 paid is applied as credit. Then extends to 25% of the next $2,000 up to $500 for qualifying expenses.
2. The credit is a refundable credit up to $1,000 per student.
3. The credit is available for qualified expenses for higher education in 2009 and 2010. Qualified expenses is defined as expenses related to tuition and related fees, books and other required materials for course.
4. The credit is dependant on the taxpayers income. It phases out for higher income taxpayers.
5. The credit is available for any of the first 4 years of post-secondary education.



http://www.irs.gov/newsroom/article/0,,id=213584,00.html

First Time Homebuyer Credit- expiring soon

With the market the way it is, the American Recovery and Reinvestment Act has placed several programs for taxpayers to take advantage. One of the popular one is the First Time Home Buyer Credit. This credit has provided tax benefits to over 1.4 million taxpayers and counting. Unfortunately, the First Time Home Buyer Credit is available for a limited time. As a result, the IRS has announced that in order to qualify for the credit, potential homebuyers must close on their new home by 11/30/09 and complete their first-time home purchase before 12/1/09.
Just a quick reminder about the First Time Homebuyer Credit- The Credit is available to US citizens or residents purchasing a qualified home in the United States. This credit is 10% of the purchase price or up to $8,000 maximum. In addition, homebuyers with qualifying income levels could not have owned a home in the past 3 years. Another added benefit is that this credit is a refundable credit, meaning the taxpayer will be able to receive the money even if they owe no tax or the credit is more than the tax liability.



source: http://www.irs.gov/newsroom/article/0,,id=213375,00.html

Several facts about New Vehicle Sales and Excise Tax Deduction

For 2009, there are special tax deductions for taxpayers who purchase new motor vehicles. The sales and excise tax may qualify for deduction for qualified taxpayers. For taxpayers in states where sales tax is not applied may be eligible to deduct other fees and/or taxes. Listed below are several facts about new vehicle sales and excise tax deduction-
1. Qualified vehicles generally include new car, motorcycles, light trucks that weigh $8,500 pounds or less and motor homes (not subject to weight limit)

2. Qualifying vehicles up to $49,500 of the purchase price may qualify to deduct the state and local sales and excise taxes on their 2009 returns.
3. Purchase of the qualified vehicle must be after Feb 16, 2009 and before Jan 1, 2010
4. Taxpayers who purchase new motor vehicles in states that do not have state sales taxes may be entitled to deduct other fees or taxes assessed on the purchase of those vehicles. Fees or taxes that qualify must be based on the vehicles’ sales price or as a per unit fee. These states include Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon.
5. This deduction applies to taxpayers who takes the itemized and standard deductions
6. The amount of the deduction is phased out for taxpayers after a certain income threshold




source: http://www.irs.gov/newsroom/article/0,,id=213200,00.html

529 Education Savings Plan- Extended

With rising tuition costs, 529 plans has been growing in popularity since it is an attractive way to save for college. 529 plans allow the taxpayer to contribute money in the plan and withdraw the money tax-free so long as it is used for qualified education-related expenses for a designated beneficiary. Qualified expenses include tuition, required fees, books, supplies, equipment and special needs services. In addition, it can be used to buy computer equipment and services for an eligible student. For 2009 and 2010, 529 plan benefits have been extended to expenses for computer equipment and technology or internet access and related services to be used by a qualified student while enrolled at qualified educational institution.

IRS provides savings & retirement initiatives to help Americans save for the future

The Treasury and IRS has issued some initiatives for retirement and savings. Listed below are a few ways to help save for the future and retirement.
1. Automatic enrollment in retirement plans- The US Treasury and IRS has issued guidance for employers to add automated enrollment in their 401(K) or SEP IRA plans to boost up savings and retirement.
2. Receive your tax refund as a U.S. Savings Bond- For the 2010 tax season, taxpayers will be able to convert their income tax refunds into I Savings Bonds
3. Unused vacation days- The Treasury and the IRS have issued guidance where for those employees who receive cash payment for unused vacation days (or other similar leave) at the end of the year or at termination of employment. These guidelines addresses the amount the employee is entitled to receive for the unused days to be put in by the employer in employee’s retirement plan as employer contribution or elective 401(K) contributions.


Source: http://www.irs.gov/retirement/article/0,,id=212061,00.html

Did you have a child this year?.. You may be able to qualify for child tax credit and reduce your tax liability.

Did you have a child this year? You may be able to qualify for child tax credit and reduce your tax liability up to $1,000 per qualifying child. A qualifying child is someone who meets the following:
1. Was under the age of 17 by 12/31/08
2. The child is your son, daughter, step child, adopted child, eligible foster child, brother, sister or a descendant of any of these individuals
3. The child did not provide over 50% of their own support
4. Lived with you for more than 50% of 2008.
5. Is a US citizen, US national or a US resident
There are exceptions to the general rule and the credit amounts are phased-out after certain income levels.

Tax tips for sudents

It's back to school time and many students will be going back to school. Below are several of tax tips.
1. Scholarships may qualify to be tax-free if you are a candidate for a degree at an eligible institution and the scholarships are used for qualified education expenses. Expenses such as room, board and travel generally do not qualify.
2. Textbook Tax credit- The credit will give students up to $2,500 for their out-of-pocket expenses, focusing on textbooks. The first $2,000 in out-of-pocket expenses goes toward the tax credit and is returned.
3. The American Opportunity Credit is available and allows more flexibility for taxpayers to qualify for this credit. For 2009, the Hope credit has changed substantially. Prior to 2009, the credit would apply only to the first 2 yrs of college. Now, the credit applies to all 4 yrs of college. In addition, the credit increased to $2,500 (100% of the first $2K of qualified expenses plus 25% of the next $2k of qualified expenses for a total of $2,500). Any amount more than $2,000 will have 25% of the remaining expenses paid back up to $2,500. Another change to this credit is that up to 40% of the credit is refundable. This means that whether or not you owe taxes, you may still qualify to receive up to $1,000.