- Days left

Stimulate US: New tax credits that will help you in April 2010

I have an uncle who is a car salesman, and from the weary look he gives me every time I ask him how sales are going, I know that the tax breaks from the stimulus package, the tax credits designed to encourage car buying, haven't exactly kicked in yet.

But give it time. The American Recovery and Reinvestment Act of 2009 was just signed into law on February 17.

But if you're wondering what tax credits are out there for you, and in case you're motivated to spend some money and help the economy, some of the main tax credits designed to stimulate the economy are:$8,000 to new home buyers. If you bought a house (not your second home, but your principal residence) on or after January 1, 2009, and if you buy one between now and December 1, 2009, you can take the first-time homebuyer's tax credit of up to $8,000 on your 2008 return or next year on your 2009 tax return.

"That's a pretty good one," says Kay Bell, author of The Truth About Paying Fewer Taxes and who writes a blog, Don't Mess with Taxes. "It's vastly improved on the other version. Before, there was a $7,500 first-time home buyers credit, but you had to eventually pay it back. That was a bait and switch. Basically," she chuckles, "if you're going to call it a credit, make it a credit, and they've done that, and that's a vast improvement."

New payroll tax credit of $400 per worker and $800 per couple in 2009 and 2010.
"This credit would be calculated at a rate of 6.2% of earned income and would phase out for taxpayers with adjusted gross income in excess of $75,000 -- and $150,000 for married couples filing jointly," says Mike D'Avolio, a senior tax consultant at Intuit, which among other things makes the TaxTurbo software. He thinks this credit is particularly helpful because it "cuts taxes for more than 95% of working families in the United States." He says that in March or April 2009, employees will begin seeing a decrease in what's held for taxes in their paychecks.

If for whatever reason, you want to not reduce your paycheck in order to claim the credit when you file your taxes in 2009 (though there's no real credible reason to do this), D'Avolio says you would need to file Form W-4 to change the new withholding amounts.

Unemployed people can exclude the first $2,400 in benefits from being taxed. That pleases Bell, who says, "Paying taxes on your unemployment checks is a little like being kicked while you're down. I guess Uncle Sam's trying to be a nice guy, and I think that's a good move, and it probably will affect many more people than we think, given the unemployment numbers."

And for people who want to buy a car this year, from February 17 up to December 31, 2009, on your 2009 tax returns you'll be able to deduct state and local sales taxes to your standard deduction or in addition to your itemized deductions. Of course, you still have to be able to get a lender to give you money for a car loan to take advantage of this tax credit, which is still tricky to pull off in this economic climate, although not impossible. That difficulty in getting those car loans is probably why my uncle seems to be aging three months for every month that passes.

Read more WalletPop coverage of how the economic stimulus package will help you, right here.

Geoff Williams is a freelance journalist specializing in personal finance and the author of C.C. Pyle's Amazing Foot Race: The True Story of the 1928 Coast-to-Coast Run Across America (Rodale).

Increase your money and finance knowledge from home

Building Credit from Scratch

Start building credit...now.

View Course »

Intro to Retirement

Get started early planning for your long term future.

View Course »

TurboTax Articles

Tax Tips for the Blind

Anyone whose field of vision falls at or below 20 degrees, who wears corrective glasses but whose vision is 20/200 or less in his best eye, or who has no eyesight at all, meets the legal definition of being blind and is eligible for certain tax deductions.

What is Form 4255: Recapture of Investment Credit?

When is a tax credit not a tax credit? When the IRS takes it back. If you're in the situation where you have to file IRS Form 4255, you might have to pay back a tax credit you've earned in prior years. This process, known as recapture, occurs if you claim a credit -- in this case, a credit for a specific type of business investment -- and then no longer qualify for that credit.

The Most Important Tax Forms for ALEs (Applicable Large Employers)

In 2015, some parts of the Affordable Care Act specifically apply to businesses, in particular, large employers. The Employer Shared Responsibility provisions affect companies with 50 or more full-time employees or an equivalent of part-time or seasonal workers. These companies are called Applicable Large Employers, or ALEs. 2015 is considered a transition year as everyone gets used to the new normal for workplace health plans.

Employer Sponsored Health Coverage Explained

The Affordable Care Act, also known as Obamacare, is simpler than some people may give it credit for. The basic rule to remember is that everyone must carry Minimum Essential Coverage (MEC) or pay a penalty. Employers with 50 full-time employees or more are obligated to sponsor plans for their workers to help them meet this requirement.

How to Report RSUs or Stock Grants on Your Tax Return

Restricted stock units (RSUs) and stock grants are often used by companies to reward their employees with an investment in the company rather than with cash. As the name implies, RSUs have rules as to when they can be sold. Stock grants often carry restrictions as well. How your stock grant is delivered to you, and whether or not it is vested, are the key factors when determining tax treatment.