IRS reminds taxpayers to take advantage of new tax breaks

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October 24, 2009

By David Compton / guest columnist The Meridian Star Sat Oct 24, 2009, 11:18 PM CDT

When the IRS reminds you to take advantage of a new tax perk, you know it must be a good deal. And that is exactly what many taxpayers will find in the American Recovery and Reinvestment Act of 2009 (ARRA). That is, if they act in time.

Taxpayers who did not own their principal residence during the last three years might still have time to qualify for the first-time homebuyer tax credit of up to $8,000. However, you must close on the home before December 1, 2009. Note that the credit is reduced for higher-income earners.

There are tax perks for current homeowners as well. Energy-efficient upgrades can qualify you for a tax credit. The credit applies to eligible property placed into service in your principal residence during 2009 and 2010. Qualifying improvements include insulation; exterior windows and doors; central air conditioning systems; water heaters and furnaces burning natural gas, propane, or oil; stoves using renewable biomass fuel such as wood, pellets, and plants; hot water boilers; electric heat pump water heaters; certain roofing material; and advanced main air circulating fans. Big ticket projects, such as solar water heaters and geothermal heat pumps, can reap a credit for up to 30% of the cost.

Looking for a new car? If you buy a qualified new car, light truck, motorcycle, or motor home before the end of the year, you can deduct the sales tax on as much as $49,500 of the purchase price. Again, the deduction phases out at higher income levels, so check the rules before you buy.

The ARRA expands higher education assistance through the American Opportunity Tax Credit, which is a new, improved version of the Hope Credit. For 2009 and 2010, the annual $2,500 maximum credit covers not only tuition, but additional education items as well, such as books and other required course materials. What’s more, the credit is available for the first four years of college rather than just two years as allowed under the prior Hope credit.

David Compton is a Certified Public Accountant with offices in Meridian and Birmingham, Ala.

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