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Tax breaks for you in the new law

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You're probably aware that President Obama signed the "American Recovery and Reinvestment Act of 2009" on February 17. But have you checked to see what the new law contains that could benefit you? Here's a quick

look at the law's tax changes and who's likely to benefit.

* MAKING WORK PAY CREDIT. Employees and self-employeds may qualify for a tax credit of up to $400 for singles and $800 for couples to be paid through lower withholding on paychecks or in a lump sum when tax

returns for 2009 and 2010 are filed. The credit phases out if income exceeds $75,000 for singles and $150,000 for couples.

* FIRST-TIME HOMEBUYER CREDIT. Those who buy a first home before November 30, 2009, may be eligible for a refundable credit of 10% of the purchase price, up to a maximum of $8,000. Again income phase-outs fall at $75,000 for singles and $150,000 for couples. If the home isn't sold for at least three years, the credit does not have to be paid back.

* NEW CAR DEDUCTION. Those who buy a new vehicle from February 17 through December 31, 2009, may take an above-the-line deduction for state and local sales and excise taxes on the first $49,500 of the vehicle's cost. In general, this includes new cars, SUVs, light trucks, motorcycles, and even motor homes. The income phase-out starts at $125,000 for singles

and $250,000 for couples.

* PAYING FOR COLLEGE. The Hope education credit is renamed the "American Opportunity Tax Credit," is increased to $2,500, and applies to four years of college, not just the first two. In addition, 40% of the credit is now refundable. Income limits apply.Another break for those paying higher education expenses: In 2009 and 2010, funds in Section 529 college plans can be used tax-free to pay for students' computers, computer technology, and Internet fees.

Other provisions in the law raise the 2009 exemption levels for the alternative minimum tax, make the first $2,400 of unemployment benefits tax-free, and subsidize health insurance premiums for those who lose their jobs. For guidance in planning under these latest tax changes, contact our office at (617)678-4021.

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