Tax Planning Opportunities in Economic Downturn

In response to the financial crisis, Congress passed multiple bills over the last six to eight months aimed at stimulating the economy.  One technique Congress uses to try to stimulate economic growth is targeted tax relief.  This legislation came so fast and furious that most taxpayers probably aren't aware of the tax relief that might be available to them.

    Most of the tax relief offered in these bills applies to 2009 and/or 2010 tax years unless extended in future legislation by Congress.  With such a small window of opportunity, we compiled a summary of these tax benefits for your review.  The list is not all-inclusive and there may be other benefits available, but the summary does cover tax benefits applicable to many of our client situations.  As with all tax legislation, many benefits are not available to higher income taxpayers, but we recommend you review the list anyway.  Perhaps your adult children or other family members may be eligible even though you are not.

    Cars and houses top the benefits list for 2009.  First time home buyers (which includes people who haven't owned a home in the last 3 years) may be eligible for up to an $8,000 refundable tax credit (refundable means the IRS cuts you a check even if your tax liability goes to zero).  Yes, there are Adjusted Gross Income (AGI) limits.  Now that Uncle Sam is in the car business, there is a lot of incentive to purchase a new car in 2009.  In some cases, one could buy a new hybrid car or SUV, trade in an old 'clunker' then receive a tax credit for the Hybrid, a voucher for the 'clunker' that exceeds the car's trade-in value, and deduct the sales tax from taxable income.