by Ryan McKeown, Associate Financial Planner, Wealth Enhancement Group

What if you are working?

Making Work Pay Credit

• $400 Credit Single, $800 Jointly (Starts phasing out at $75K Single, $150K Joint
  
  
  • You get the credit via a reduction in tax withholding or in a lump sum when your tax return is filed
    
    
  • You need to have earned income. Essentially, this credit is meant to offset the social security/medicare taxes for the 1st $6,452 in earnings for single ($12,904 for couples)

What if you are thinking about buying a house?

First Time Homebuyers Credit

• Up to $8,000 refundable credit (up from $7,500) for a first time homebuyer (or hasn’t owned a home in three years) purchasing a home between 1/1/2009 through 11/30/2009.  (10% of purchase price up to $80K)
  
• No repayment requirements if you live in the house for 36 months (does not apply for anyone who took this credit in 2008!)
  
• Credit starts to be phased out at $75K single/$150K married

What if you are retired already?

$250 Economic Recovery Payment

• One-time payment of $250 (in 2009 only) for Social Security recipients, railroad retirees, disabled veterans
  
• Checks will probably be distributed like the 2008 stimulus payments/through monthly social security checks

How about if I’m buying a new car?

New Car Deduction

• Above the line deduction for sales tax paid on new vehicle purchases in 2009 (only those purchased after the date Obama signs legislation) on the portion of tax attributable to the first $49,500 of the purchase price of any one vehicle
  
• Deduction starts phasing out at $125K single/$250K joint

What if you are thinking about going to college, in college already, or have kids that are already in or will be attending college?

HOPE Credit for Education (now called “American Opportunity Credit”)

• In 2009 and 2010, Credit is a maximum of $2,500
  
• Extends eligible students from the first two years to all four years 
  
• Starts phasing out at $80K Single/$160K Joint (was $50K Single/$100K Joint)
  
• 40% of credit is refundable
  
• Only counts for undergraduate degrees

Qualified Tuition Programs (529 Plans)

• Qualified expenses for tax-free distributions now include computers, computer technology, and internet access (as long as the student uses the technology, the law allows other family members to use without accounting for personal use)

What if I got laid off already?

Unemployment Compensation

• First $2,400 of unemployment compensation is exempt from income tax

COBRA Benefits

• If involuntarily separated from employment between 9/1/2008 and 1/1/2010, an individual can elect to pay 35% of his/her COBRA amount and have it treated as paying the full amount
  
• Former employer will pay the other 65%, but will be reimbursed by crediting those amounts against income tax withholding and payroll tax deposits
  
• The payroll tax forms have been changed to accommodate this for the first quarter of 2009

What if I’m thinking about making improvements to my house already? 

Residential Energy Property Credit

• (2009 and 2010) 30% Credit up to $1,500 (essentially spend $5,000 to receive the $1,500 credit) for purchasing insulation materials, exterior windows, skylights, exterior doors, central air conditioners, natural gas, propane or oil water heaters or furnaces, hot water boilers, electric heat pump water heaters, certain metal roofs and stoves, and advanced main air circulating fans