Use These Tax Breaks Before the End of the Year (Kiplingers)

Take Advantage of These Stimulus Breaks Soon
Posted Thu Sep 3, 11:05 am ET
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The economic-stimulus plan that President Obama signed into law February 17 includes several tax breaks that will expire in the next few months. Some of these breaks are for big purchases, which may require a few months' worth of planning. And people who lose their job in 2010 won't be able to take advantage of some stimulus-related benefits. Here's a reminder about a few key provisions that are scheduled to end soon -- including a major credit that disappears before the end of the year.

First-time home-buyer credit. The stimulus plan provides a tax credit of up to $8,000 for purchasing a first home between January 1 and November 30, 2009. Keep in mind that this break does not last through the end of the year -- you must close on the home no later than November 30.

You don't have to pay back the credit, as long as you live in your home for at least three years. You're considered a first-time home buyer if you (and your spouse, if you're married) haven't owned a home in the past three years. The credit begins to phase out if your modified adjusted gross income is more than $75,000 (or $150,000 if married filing jointly), and it disappears if your income exceeds $95,000 if you're single (or $170,000 if married filing jointly).

You don't need to wait until next April to get the money. After you close on the house, you can get the $8,000 refund quickly if you claim the credit for a 2009 purchase on an amended 2008 tax return (file Form 1040X.

Tax break for new-car purchases. If you're thinking about buying a new car, it may pay to do so before the end of the year. The stimulus plan lets you write off state and local sales taxes and excise taxes paid on up to $49,500 of the cost of a new car you buy between February 17 and December 31, 2009. If you live in a state that doesn't have a sales tax, you still get a tax break if your state imposes a flat fee on the purchase of vehicles or a fee based on the price you pay. The tax break applies to new (not used) cars, light trucks, motor homes and motorcycles. To qualify, your modified adjusted gross income must be less than $135,000 if you're single, or $260,000 if married filing jointly (the deduction starts to phase out if you earn more than $125,000 if single, or $250,000 if married filing jointly).

Two breaks for the unemployed will expire
COBRA subsidy. When you lose your job, you can generally remain on your employer's health-insurance coverage for up to 18 months, as long as you pay the full premium yourself. The stimulus provides a subsidy that covers 65% of the COBRA premiums for up to nine months after you lose your job. But this break applies only if you lose your job by December 31, 2009. You won't get the break on premiums if you lose your job in 2010.

Breaks for unemployment benefits. The stimulus also provides an extra $25 in weekly unemployment checks until December 31, 2009, and lets you exclude up to $2,400 in unemployment benefits from your taxes in 2009. But neither of these provisions has been extended yet to apply to 2010.

Some of these breaks could be extended into 2010, but it seems unlikely at the moment. "Extension of these items has not yet been included in any major tax bills," says Mark Luscombe, principal analyst with CCH, a tax-publishing firm. "As talk continues of the recession ending this quarter, it appears more likely that at least the new tax breaks on the list may be allowed to expire, as was just done with the 'cash for clunkers' program. If, however, as the fall progresses, concern about the health of the economy continues, some of these provisions could be considered for extension."