Stimulus provides tax breaks for first-time homebuyersBy Derek Jordan
Wick News Service
SIERRA VISTA — The American Recovery and Reinvestment Act of 2009, the $780 billion package signed into law by President Obama just over a month ago on Feb. 17, is already a significant impact on tax returns, especially for first-time homebuyers, local tax advisors said.
“Word is getting out” about the first-time homebuyers, tax credit, said Kathy Kircher senior tax advisor with H&R Block.
The passing of the stimulus changes the previous year’s tax credit for homeowners from up to $7,500 that had to be paid back, to up to $8,000 that does not.
Anyone who has not owned a home for three years prior to purchasing their new home is considered a first-time homeowner, Kircher said.
Anyone who purchased a new home on or after Jan. 1, 2009 through September 2009 qualifies. Only individuals making up to $75,000 or married couples making up to $150,000 a year qualify for the tax credit.
Kircher said the new tax credit is one way the government is trying to stimulate the housing industry once again.
“It’s the government saying, OK people, it’s time to move on,” she said. “As a taxpayer, I’d rather see my money go to (the housing industry) than to AIG.”
Those who already filed for the previous version of the tax credit this year, which had to be paid back, can file an amended tax return to take advantage of the new policy.
Something else to watch out for while filing taxes this year stems from the stimulus money given out in 2008.
Those who did not receive a check from the government last year as part of the economic stimulus plan, or did not receive the full amount they qualified for, may be eligible for it in the form of a tax credit this year, said Monika Patience, a certified public accountant in Bisbee who has been preparing taxes for more than 30 years.
“I have a lot of people come in here and they don’t even know they are eligible for this,” Patience said.
Even with new benefits like these, Kircher said she is still seeing the effects of a tumbling stock market more than ever this year, as more people are pulling out of their 401(k) plans, trying to save themselves from losing any more money.
“There’s a noticeable increase in people who have cashed out just from fear,” she said.
The penalties incurred with pulling out of a 401k before it matures, include standard state and federal taxes and a 10 percent penalty tax.
“It’s the most expensive money in the world,” she said.
All totaled, a person could end up with just more than half of what they actually had before cashing out.
Coming up next year, new tax breaks that are incorporated into the stimulus offer up even more opportunities to save money.
Good news for students comes in the form of the Hope Credit, which can save a student $2,500 that was spent on tuition, fees and course materials for college.That amount increased from $1,800 last year. The previous version of the tax credit also only applied to students in their first two years of college. That has been extended to up to four years.
This and other education credits are often overlooked by individuals when filing their taxes, and they can be “very lucrative,” Patience said.
Those getting unemployment benefits will also receive a tax break next year, said Kircher.
The first $2,400 of unemployment benefits will not be taxed in 2009.
Individuals earning up to $75,000 in 2009 will also be getting a little break in the form of a refundable tax credit of up to $400 next year, thanks to the Making Work Pay tax credit. Married couples earning up to $150,000 can also qualify for $800 under the credit.
The refund will be paid out not as one lump sum, but over time and incorporated into paychecks.