New 2009 Money-Saving Tax Laws
In order to stimulate the depressed housing market, tax incentives were created for first-time homebuyers (condos and co-ops are okay) under the Housing Assistance Act of 2008. New homeowners, defined as taxpayers who have not owned a home in the last three years prior to the date of purchase, will be given a credit of 10% of the purchase price of a home, up to $7,500 on their tax return, subject to income requirements. Single taxpayers qualify if their income is under $95,000, married under $170,000. The credit is refundable and is repaid ratably in future years (up to 15 years if the taxpayer qualifies for the full credit). This credit is essentially an interest-free loan from the government that could prove especially beneficial in this tight credit market. The credit is available for eligible purchases made after April 8, 2008 and before July 1, 2009. Also, if a taxpayer makes a purchase in 2009, the law allows an election to be made to treat the purchase as having been made in 20a08. In addition, a second provision addresses taxpayers who do not itemize their deductions but claim the standard deduction, an additional standard deduction for state and local property taxes paid will be allowed for 2008 and 2009 tax returns. The deduction amount is $1,000 for joint returns and $500 for all other fliers, or the actual property tax paid if the amount is less.
The Mortgage Debt Relief Act provides relief for taxpayers who lost their homes to foreclosures as well as those who avoided pending foreclosures through mortgage reductions. Under this relief, impacted taxpayers will be able to exclude up to $2 million of cancellation-of-debt income related to the mortgages on their principal residences. It is important to note that the relief is not available for second homes or vacation homes.
The Emergency Economic Stabilization Act of 2008 extends the following provisions for 2008 and 2009: optional state and local sales taxes (this is especially useful for many NYS/NYC retirees), deductions for teachers’ classroom expenses of $250, tuition and fees up to $4,000, and the tax-free IRA distributions for charitable purposes.
The Stimulus Rebate Recovery provides that taxpayers who filed after October 15, 2007, or did not file, can now file in 2008 and recoup the stimulus check. Also, taxpayers who did not receive the maximum rebate last year can be made whole based on their 2008 tax income. In addition, taxpayers who had a child in 2008 will be entitled to a $300 payment. The Worker, Retiree, and Employer Recovery Act will relieve taxpayers from withdrawing required minimum distributions from retirement plans for the 2009 tax year. Trillions of dollars have evaporated from retirement savings and this will help to safeguard remaining assets during this economic crisis. Any questions on any of the topics, please contact me at (516) TAX-SAVE or mrbarrytax.com.#