Every Dollar Counts - Take Advantage of Available Tax Credits

There are a number of tax credits out there, some of which can and should apply to your situation and others that just won't work for you. We have highlighted a few below that are new onto the scene.

"Making Work Pay" Tax Credit: For 2009 and 2010, those with earned income may qualify for this credit at an amount of $800 for joint filers and $400 for single filers. This credit is phased out as your Modified AGI increases from $150,000 to $190,000 if married filing jointly ($75,000 to $95,000 on a single return). This tax credit is different from last year's economic stimulus plan in that instead of receiving a rebate check, the IRS has reduced the federal income tax withholding by the amount of the credit. Therefore, your 2009 take-home pay has been increased by the amount of the credit. Since the credit is built into the withholding calculations, it could result in your withholding being less than your taxes due. This situation becomes more likely if both you and your spouse are employed and your combined income is above the phase-out levels or you have two jobs and both employers are reducing your withholding. If you fit this criteria, please contact your CPA to determine whether you need to increase your 2009 withholding to avoid a penalty.

Hybrid Vehicle Credit: If you have decided to "go green" this year and purchased a hybrid vehicle, then you may be eligible for a tax credit, and for the first time, this tax credit is allowed against AMT. There are phase-out rules per manufacturer, so please check out the updated list of the credit status of all hybrid vehicles: http://http//www.irs.gov/businesses/corporations/article/0,,id=203122,00.html


If you purchased a hybrid vehicle and need help determining your eligibility, please contact your CPA.

Please see the below links for further tax credits that may be available to you, and as always, if you are looking for help in your tax planning, please contact us.

Foreign Tax Credit http://http//www.irs.gov/publications/p514/index.html

Credit for Child Care & Dependent Care Expenses http://http//www.irs.gov/publications/p503/index.html

Education Tax Credits http://http//www.irs.gov/publications/p970/index.html

Credit for the Elderly or Disabled http://http//www.irs.gov/publications/p524/index.html

Retirement Savings Contribution Credit http://http//www.irs.gov/pub/irs-pdf/p4703.pdf

Earned Income Credit http://http//www.irs.gov/publications/p596/index.html

Empowerment Zone & Renewal Community Employment Credit http://http//www.irs.gov/publications/p954/index.html


In addition to the above credits, we want to talk about one more planning opportunity with you today, and that is how to plan with the current zero percent capital gains tax rate. This opportunity started in 2008 and will be available through 2010. Long-term capital gains and qualified dividends that would be otherwise be included in the 15% or below ordinary income tax bracket are taxed at zero percent if realized in 2009 or 2010. For 2009 taxpayers filing jointly who have W-2 income up to $67,900 can take advantage of the zero percent rate. If you have been historically at a higher rate, but find yourself between jobs, recently retired, or have higher than normal business deductions, please be aware of this opportunity and speak with your CPA to formulate an end of year plan.


Come back next week for more insight on how to maximize your tax planning for the end of this year and looking forward to 2010. We even have a tip out there for those of you that file with a standard deduction!



704.544.8429 info@mcarthurco.com