RMDs Suspended for 2009

One of the biggest changes for 2009 was the suspension of the rules requiring individuals over age 70 ½ to make withdrawals from certain retirement accounts.  This suspension applies to 2009 only, so seniors will have to resume taking their required minimum distributions in 2010.

First Time Homebuyer Tax Credit

In an effort to stimulate the housing market, a “first-time” homebuyer was established back in July 2008, but new legislation in 2009 gave the credit new life.  The first credit was actually a loan (up to $7,500) that had to be paid back over 15 years; this credit applied to first-time homebuyers who purchased homes between April 9, 2008 and July 1, 2009.

In February 2009, the American Recovery and Reinvestment Act of 2009 extended the credit through November 30, 2009 and increased the amount to $8,000.  Even better, taxpayers who qualified for this credit did not have to pay it back, unlike the first credit.

The Worker, Homeownership, and Business Assistance Act of 2009, signed by President Obama signed on November 6, made even more changes to the credit including:

• Higher income limits apply, allowing more people to qualify for the credit.  Under the new legislation, the credit is reduced if your modified adjusted gross income (MAGI) is more than $125,000 ($225,000 if you are married filing a joint return).  The credit is phased out completely if your income is greater than $145,000 ($245,000 for married filing jointly).
• Homes purchased before May 1, 2010 qualify for the credit
• Homes purchased for more than $800,000 don’t qualify for the credit
• The definition of first-time homebuyer was expanded to allow people who have had their current home for more than 5 consecutive years to qualify for the credit.

Energy Credits

While the energy credits aren’t new in 2009, the American Recovery and Reinvestment Act of 2009 (ARRA) extended the credits to encourage the use of efficient energy sources.  The biggest change was to increase the lifetime tax credit for energy efficient home improvements to $1,500 (from $500).  The separate cap for windows ($200) was also removed, although the lifetime cap still applies.

Cash for Clunkers

To stimulate the auto industry, the Cash for Clunkers program provided cash vouchers for consumers who traded in older, less fuel efficient cars for new cars (with better fuel economy).  This program ended on August 24, 2009 when it ran out of funds.

Help With COBRA Premiums

People who lost or lose their jobs between September 1, 2008 and January 1, 2010 may get help paying their COBRA premiums.  A new government subsidy was established to help pay up to 65% of the COBRA premiums paid by eligible individuals for up to nine months.  This subsidy is phased out for people with higher incomes.

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