Make us your home page
Instagram

Still a month to take advantage of income tax breaks

You have just over a month left to make moves to cut your tax bill in the spring.

Besides the usual tax strategies, such as making charitable donations before year's end, you might be able to take advantage of one of the many temporary tax breaks Congress created to stimulate the economy. • One of them, the popular first-time home buyer credit, was recently extended so you have more time to get it. But it's unclear whether others will survive. • So, as you think about the coming tax season, here are some tax breaks to keep in mind. —Baltimore Sun

Home buyer credit

The $8,000 first-time home buyer credit recently was extended and expanded so more of us will be eligible. Now, even if you're not buying your first house, you might qualify for a credit worth up to $6,500 if you're purchasing a principle residence after Nov. 6. To qualify, you must have owned a house for five consecutive years during the eight years before buying the new one. The full credit is available if modified adjusted gross income is up to $125,000 for singles and $225,000 for married joint filers. It then starts phasing out. You also have more time to buy. The house must be under contract by April 30, and the deal must close by the end of June.

Sales tax deduction

"You can still buy a car in 2009 and get to write off the sales tax on the car," said Barbara Weltman, author of 1001 Deductions & Tax Breaks. This deduction applies to new vehicles purchased from Feb. 17 to the end of this year. And you can deduct the sales and excise taxes paid on the first $49,500 of the purchase.

Energy credits

For this year and next, deduct up to 30 percent of the cost of energy improvements to your main residence, such as adding energy-efficient windows, doors, insulation furnaces, air conditioners, heat pumps and water heaters. The amount of credit, though, can't exceed $1,500 for the combined two-year period.

"It's a triple win: You save on your taxes, you save on your energy and you're probably adding value to your home," Weltman said. Check out dsireusa.org for the various state and local energy tax breaks.

Tax breaks for unemployed

You don't have to pay income taxes on the first $2,400 of unemployment benefits received this year. Also, if you've been laid off any time between Sept. 1, 2008, and the end of this year, you could qualify for a nine-month federal subsidy that pays 65 percent of the so-called COBRA premiums to remain covered under your old employer's health insurance plan.

Education breaks

The new American Opportunity credit, good for this year and next, is a more generous version of the old Hope Scholarship credit. The Opportunity credit is worth up to $2,500 in higher education costs — tuition, fees, books or required materials — paid in any one of the first four years of school. The credit essentially covers the first $2,000 spent on college costs and 25 percent of the next $2,000 spent.

The credit begins to phase once income reaches $80,000 for singles, $160,000 for married joint filers.

Ponzi relief

Whether you lost money to Bernie Madoff or another Ponzi scheme, the IRS earlier this year said you can treat the loss as a theft rather than writing it off as a capital loss, which limits how much you can deduct each year.

"Theft losses have no dollar limit on what you can deduct," Weltman said. To qualify as a theft, the lead figure in the scheme must be indicted or charged with a crime.

Harvesting losses

A traditional strategy is to offset capital gains on investments with capital losses and use up to $3,000 in excess losses to offset ordinary income. If you panicked and sold last year when the stock market fell, remember you could still be sitting on losses that can be used to offset any gains this year, said Bob D. Scharin, senior tax analyst at Thomson Reuters' Tax & Accounting.

Still a month to take advantage of income tax breaks 11/21/09 [Last modified: Saturday, November 21, 2009 3:31am]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Baltimore Sun.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. United Airlines CEO to investors: We'll be more focused on customers

    Airlines

    CHICAGO — The CEO of United Airlines assured shareholders Wednesday that the company is doing all it can to be more customer-friendly since video surfaced of a passenger being violently ejected from a plane last month.

    Chicago Police arrest protesters after they sat down in a busy street blocking traffic outside a United Airlines shareholders meeting Wednesday, in downtown Chicago. The people who were arrested were protesting the low pay of employees of companies that provide meals and other services for United Airlines at Chicago's O'Hare Airport.
[Associated Press]
  2. Humana adding 200 telemarketing jobs in Tampa Bay

    Economic Development

    TAMPA — Health insurance company Humana Inc. is hiring more than 200 workers in Tampa Bay. The Louisville, Ky.-based company said Wednesday that the new positions will focus on phone sales for Humana's direct marketing services department.

  3. Tampa Bay home prices still soaring amid tight supply

    Real Estate

    Sales of Tampa Bay homes dropped in April but prices surged yet again as Florida's real estate market continued to be defined by tight supply and high demand.

    The historic Century Oaks estate overlooking Clearwater Harbor has sold for $11.18 million, the most ever paid for a home in the Tampa Bay area. [Courtesy: Coastal Properties Group]
  4. These days, don't hit the theme park without an app and a phone charger

    Florida

    Emile Crawford stocks two back-up phone battery chargers these days when she takes her kids to Disney World. But she dare not venture into a theme park without a smart phone app, an accessory becoming as necessary as sunscreen in Florida theme parks.

    A wristband visitors will wear at the new Volcano Bay water park in Orlando, Florida. The wristband, called Tapu Tapu, tells you when it's your turn to get on a ride. It also lets you pay for food so you don't have to carry a wallet and opens lockers so you don't have to  carry a key. (Universal via AP)
  5. James Cameron, Zoe Saldana and more appear at Disney's Pandora

    Florida

    ORLANDO — As he stood on a stage at Disney World Wednesday, director James Cameron revealed his teenage dreams.

    Zoe Saldana tweeted a photo of herself from Wednesday's appearance at a new land in Disney's Animal Kingdom, Pandora -- the World of Avatar. The land is based on James Cameron film, in which she stars. Photo via Twitter.