Take Advantage of the Stimulus Tax Incentives While You Still Have Time

Economic Stimulus

Time is running out for you to take advantage of the tax incentives provided by the American Recovery and Reinvestment Act (ARRA). The ARRA (or stimulus package) was unleashed on our down economy in February of 2009. Regardless of your politics, or it’s actual effects on the Economy, the stimulus is available for the taking.

Because it’s been several months since the act was first rolled out, I thought I’d revisit some specifics about the incentives, as well as any related deadlines. Hopefully you can find something here that applies to you and your particular situation.

Buy a Car: New Car Sales Tax Deduction

If you purchase a new car, light truck, motor home, or motorcycle you may be eligible for a federal tax deduction of the state and local taxes you pay on the new purchase. That probably amounts to around $2,000 in tax deduction for a $20,000 car. Depending on your tax bracket, you could save around $500 in taxes. The deduction phases out at certain income levels, and only applies to cars under $49,500. Deadline: Purchase the new vehicle by December 31, 2009

Economic Stimulus: The News Car Sales Tax Deduction
Economic Stimulus: The News Car Sales Tax Deduction

Buy a House: First-Time Homebuyer Credit

Probably the most discussed incentive found in the ARRA, the first-time homebuyer tax credit is a refundable credit applied to your 2009 tax liability. If you haven’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. The credit is phased out for certain income levels. This credit was recently extended. Initial Deadline: Close on the sale by November 30, 2009 ~ Extended Deadline: April 30, 2010 (for sales contract); June 30, 2010 (for closing)

Upgrade to a Better House: Long-Time Homebuyer Credit

President Obama just signed into law the Worker, Homeownership, and Business Assistance Act of 2009. This law extends the deadline created for the first-time homebuyer credit. It also creates a credit of up to $6,500 for current home owners to purchase a new home. You must have owned your current home for the past five years. The credit is phased out for certain income levels. Deadline: April 30, 2010 (for sales contract); June 30, 2010 (for closing)

Improve Your Current House: Home Energy Efficient Credits

The tax credit normally provided for energy efficient improvements to your home has been increased this year to “30 percent of the cost of all qualifying improvements”. Improvements that qualify include things like insulation, energy-efficient windows, and energy-efficient heating and AC units. Deadline: Place the improvements in service by December 31, 2010

Buy a Computer with College Savings: Certain Computer Technology Purchases Allowed for 529 Plans

You can now include computer equipment and Internet service in the cost of your child’s education when cashing out those 529 Plan funds. Deadline: Spend the 529 Plan funds by December 31, 2010

Go to College: Tax Credit for First Four Years of College

The stimulus created the American Opportunity Credit, which broadens 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. Income limits apply. Deadline: December 31, 2010

For more information about the tax incentives found in the ARRA, see the IRS Information Center.

Caution: Incentive Shouldn’t Always Equal Action

It’s important to point out that just because these incentives are available, you shouldn’t necessarily run out and buy something. Each purchase decision should be made carefully, and other factors (beyond tax incentives) should be considered.

Comments (16) Leave your comment

  1. I can not install TT 2013 on my XP Computer.
    Gives error code 1602. Have used TT since 2005 no problems. Purchased CD at Best Buy.
    When will you fix problem??

  2. Does the Stimulus payment seniors received in the amount of $250. have to be reported as income on our tax return? There was no place on tax information questions where this was addressed.

  3. I used TurboTax last year but do not recall how much I paid for the program and extra states etc…

    Can Turbotax be made to ask me how much I paid for Turbotax?… so next year when it imports the data from this year I will already know Tax Preparation Fees?

  4. I would like to know why Turbo tax says we are getting back more money from Federal than was taken out? we are retired filing jointly.

  5. I paid 3,300.00 dollars last year for my daughter’s down payment on her house,is this something I can claim on my taxes?

    1. Hello! I simply wish to give a huge tbumhs up for the nice data you might have here on this post. I will probably be coming back to your blog for more soon.

      1. Hi Takashi,
        We are glad you like the post. Please check back for more interesting topics.
        Thank you,
        Lisa Greene-Lewis

  6. My daughter is full time student and a part time worker for 2009, can I still claim her as a dependent and does she need to file her own income tax.

  7. Hi William and Mary – This month TurboTax has a promotion called Free Tax Question (www.freetaxquestion.com) where you can get your questions answered for free. Check it out, they should be able to help you out!

    Thanks!

    Ashley

  8. If I purchased qualified energy efficiet window, is the federal credit refundable, or I have to have tax liablity to benefit this credit?

  9. Why is turbo tax telling me I do not qualify for the American Opportunity College Tax credit when I only made $62,000 last year? Can anyone answer this for me? I am finding it frustrating for the first time trying to use TT.

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