Tax Incentives Found in the American Recovery and Reinvestment Act

Are you taking advantage of the tax incentives available to you as a result of the American Recovery and Reinvestment Act (ARRA)? Often referred to as the economic stimulus package, the ARRA was unleashed on our down economy in February of 2009. It’s been a while since the act was rolled out, so I thought I’d share some of the tax incentives that may effect some of your spending and saving this fall.

The act was a huge piece of legislation and provided tax incentives for you, the individual, in the following areas: for those paying for college, first-time homebuyers, new car owners, and those interested in making energy efficient choices for their homes.

Regardless of how you feel about the necessity of the act, it’s now there for the taking. The way I see it, you might as well make the most of it.

First-Time Homebuyer Credit

I’ve shared in length the details of the first-time homebuyer tax credit. But essentially, someone who hasn’t owned a home in the last three years can get a credit of up to $8,000 towards the purchase of a new home. This is a great win for those true first timers out there. What a windfall. The credit is taken against 2009 taxes (although you can amend your 2008 return and get the credit now) and does not have to be paid back. As you can imagine, home sales are shooting back up again (at least temporarily). The deadline to buy the home is currently set for December 1, 2009. But there’s already a bill in the House to extend the deadline to 2010. Odds are that this will pass into law.

New Vehicle Purchase Incentive

Certain taxpayers are eligible for federal tax deduction of the local taxes they pay on the purchase of a new car. It phases out at certain income levels, and only applies to cars under around$50k. See more at New Car Buyer Tax Deduction.

Making Work Pay and Withholding

The Making Work Pay credit has been providing you tax relief throughout the year, to the tune of about $13 dollars more every week. If you are self-employed, you’ll get to claim the credit at the end of the year with your 2009 return. Be sure and check your pay stub to ensure you are getting the proper tax relief.

Tax Credit for First Four Years of College

The American Opportunity Credit broadened coverage of the existing Hope Credit for years 2009 and 2010. This applies to only the first four years of college. The maximum annual credit of $2,500 is available for qualifying students. Think colleges will respond by raising fees next year? The folks at CollegeScholarships.org sure think so. I tend to agree.

Certain Computer Technology Purchases Allowed for 529 Plans

Now you can include computer equipment and Internet service in the cost of your child’s education when cashing out those 529 Plan funds for years 2009 and 2010. I wonder if Dell and Apple lobbyist had anything to do with this inclusion? Ahh, I’m a cynic.

Don’t have a 529 Plan set up for your children yet? Here’s more than $100 in 529 plan bonuses to get you started with college savings.

Energy-Efficient Home Improvements

The tax credit for energy efficient improvements to your home has been increased. Improvements that qualify include things like insulation, energy-efficient windows, and energy-efficient heating and AC units.

Have you been able to take advantage of these tax incentives? Do you think they’ve helped or hurt our economy?

Source: IRS – Six Recovery Tax Incentives

Good Reads from Last Week

Carnivals

Economy and Your Finances, Pecuniary Delights, Money Hacks Carnival, Festival of Frugality, Personal Finance, Debt Reduction, Financial Planning, Twenty Something Finance, Family Life.

Real Personal Finance for a Life Without Limits!

Tax Incentives Found in the American Recovery and Reinvestment Act