fliprent

So far I like what I’ve seen from the American Recovery and Reinvestment Act (ARRA) signed by President Obama last Tuesday.   From a Tax perspective it appears to contain some very good relief for the average American citizen.  Some of the highlights from the new plan include a new refundable credit of up to $800 for lower and middle income America.  Unless you make more than 95k single or 190K MFJ, you should qualify for this credit.

 Also included in the ARRA economic stimulus plan is an expanded Hope Credit. The new credit is called the American Opportunity Tax Credit.  The new credit can be taken for all 4 years of college instead of the first two and has been increased to a maximum of $2500.   The best part of this credit may be that up to 40% of the credit is refundable.  This means that it can be added to your refund or perhaps even result in a refund even when the taxpayer would have otherwise owed.  Also parents with Section 529 plans for their kid’s college will be happy to know that computers and Internet access are now considered qualified higher education expenses for purposes of the section 529 distributions.

Of all the bonuses for individual taxpayers, the one that may create the most “stimulus” is the First Time Home Buyer Tax Credit.  Although on the surface it appears that this credit is only $500 more than the previous credit, there is a MAJOR difference.  The new plan eliminates the requirement to repay the credit over a 15 year period.   The previous “credit” required that taxpayers repay $500 per year for 15 years.   Also the new credit can be used for 2008 tax year by allowing home buyers to treat the purchase date as though it was purchased on Dec 31, 2008.  However, any home purchases prior to Dec 31, 2008 cannot be used for this credit.   This credit is also refundable as in the previous year.  This means that a taxpayer that otherwise would have owed $1000 without the credit, can now possibly get a $7000 refund instead!  One caveat to this credit is that it must be repaid if the homeowner sells or moves within 3 years.

With interest rates at all time lows, first time home buyers may not have a better time to buy a home ever again.  So what are you waiting for???  Go find a home!