Call for your personal tax consultation today! 

New Lower Limits for the Child Tax Credit

Under the American Recovery and Reinvestment Act (ARRA), more families will be eligible for the additional child tax credit because of a change in the way the credit is figured.

The child tax credit is for people have one or more qualifying child(ren) but earn only a modest income. The credit is $1000 per dependent child (under 17) who lived with you for more than half of the year. The credit is first applied to tax due. The balance is refundable.

ARRA reduces the minimum earned income amount to $3,000. Before ARRA, the minimum earned income amount was set to rise to $12,550. By reducing the amount to $3,000 more taxpayers will qualify to use the additional child tax credit.

For this purpose earned income includes only taxable earned income, and nontaxable combat pay. The credit phases out when AGI reaches $75K for single & head of household, $110K for married filing joint.

Taxpayers who buy a new car vehicle this year may be entitled to a special tax deduction when they file their 2009 federal tax returns next year. The tax break is part of the American Recovery and Reinvestment Act of 2009.

Here are a few things you should know about this new deduction:

1. State and local sales taxes paid on up to $49,500 of the purchase price of qualifying vehicles are deductible.
2. Qualified motor vehicles generally include new (not used) cars, light trucks, motor homes and motorcycles.
3. Purchases must occur after Feb. 16, 2009, and before Jan. 1, 2010.
4. This deduction can be taken regardless of whether or not you itemize other deductions on your tax return.
5. Taxpayers will claim this deduction when filing their 2009 federal income tax return next year.
6. The amount of the deduction is phased out for higher income taxpayer's ($125K++)
   

Homebuyer Credit Expanded and Extended

The Worker, Homeownership and Business Assistance Act of 2009, signed into law on Nov. 6, 2009, extends and expands the first-time homebuyer credit allowed by previous Acts.

Under the new law, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return.  

The new law also:

• Authorizes the credit for long-time homeowners buying a replacement principal residence.
• Raises the income limitations for homeowners claiming the credit.
• Applies only to homes used as a taxpayer's principal residence.
• DOES NOT have to be repaid if taxpayer remains in the home for a three year period.
  
• Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar.
• Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.