Congress passed five new tax bills in 2008, which spelled out about 500 changes in tax law. The stimulus plan also provides some tax benefits. Some of these changes translate into new tax credits you may not even know about, so we’ve compiled a list of five that may save you money when you file in 2009:
1. Property Tax Break. For non-itemizing property owners only, this tax break allows you to write off state and local property tax payments (up to $500 for individuals and $1,000 for couples). This write-off is added onto your normal standard deduction amount. You can only write off as much as you have actually paid, however.
2. First-Time Homebuyer Credit. Thanks to the stimulus plan, those who have bought or will buy a home between Jan. 1, 2009 and Dec. 1, 2009 can claim a tax credit of up to $8,000. In order to qualify, you cannot have owned a primary residence in the U.S. for the last 3 years, however. If you bought a house between April 9, 2008 and Jan. 1, 2009 you may qualify for a $7,500 tax credit. Unfortunately, this credit is more like an interest-free loan because it has to be paid back in equal installments over 15 years.
3. Disaster Deduction. Normal rules for disaster-related personal casualty losses have been waived for 2008 because there were so many weather-related disasters. In the past, losses had to be more than 10% of your adjusted gross income. This year, you can add the amount of a loss from a federally declared disaster to your standard or itemized deduction.
4. Energy Tax Credit. You may remember this tax credit from when you filed in 2007, but it was gone in 2008. Guess what? It’s back. Thanks to the Emergency Economic Stabilization Act of 2008, if you make energy-related improvements to your home, you can take a credit of up to $500. You only get up to a $200 credit for storm windows, however.
5. Recovery Rebate Credit. The stimulus payment you got last year was considered an advance on your 2008 taxes. It was based on your 2007 income. If you didn’t get the full amount of that rebate, you may still be entitled to a rebate credit if your circumstances have changed significantly between 2007 and 2008. Such circumstances include having a child in 2008 or having a significant drop in income. Use IRS Form 1040 to determine if you still have stimulus money waiting for you.
—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.