Here Come the Tax Cuts

Here's What to Expect
The House recently approved a big package to help jump-start the economy and get extra money into taxpayers' wallets, and the Senate will follow soon, with the goal of getting a bill to President Obama's desk by mid-February.

The House tax bill is a good blueprint for what will eventually pass because it contains a number of Obama's campaign promises on taxes.

Click through to see what tax breaks may be in store for individuals in both the House and Senate packages.

Here Come the Tax Cuts

Payroll Tax Credit for Individuals

The House's proposed credit would equal 6.2% of earned income in 2009 and 2010, capped at $500 for single filers and $1,000 for joint filers each year. It would be phased out for higher-incomers -- between $75,000 and $100,000 of adjusted gross income for single filers and between $150,000 and $200,000 for married couples.

Taxpayers won't have to wait until they file their 2009 returns to get the credit. Congress will probably instruct the IRS to adjust withholding tables so that the tax relief will show up in paychecks later this year. Since self-employeds don't benefit from a change in the withholding tables, they can reduce their estimated payments by the amount of the credit and claim the credit when they file their tax returns for 2009.

Here Come the Tax Cuts

Increasing the Maximum Hope Credit for College Costs

The Hope credit limit would rise to $2,500 per student per year in 2009 and 2010, up from $1,800, and be made available for four years of college, not just the first two. The credit would also cover the cost of books and be refundable for more middle-income taxpayers.

Here Come the Tax Cuts

Enhancing the First-Time Home Buyers' Credit

This credit was enacted last year. Under current law, the credit, which is capped at $7,500 and applies to purchases of primary homes after April 8, 2008, and before July 1, 2009, must be repaid over 15 years, starting two years after the credit is claimed. In the House and Senate proposals, folks who buy homes in 2009 don't have to pay back the credit as long as they don't sell the house within three years.

Here Come the Tax Cuts

Increasing the Tax Credit for Energy Saving Home Improvements and Extending It Through 2010

The credit is likely to be raised to 30%, from 10% now, with a cap of $1,500 rather than $500. Improvements that qualify for the credit include energy efficient skylights, windows, outer doors, water heaters, central air conditioners and biomass stoves.

Here Come the Tax Cuts

Increasing Earned Income Credit

Aiding low-incomers by increasing the earned income credit for families with three or more children and allowing a bigger share of the child tax credit to be claimed in cases where the credit exceeds a taxpayer's income tax liability.

Here Come the Tax Cuts

Businesses will also get pieces of the tax cut pie. Among them:

· Allowing companies to carry back most or all of their losses for five years instead of two, except for firms that received special aid payments from Treasury. That will give significant relief to home builders and other unprofitable industries.

· Reviving 50% bonus first-year depreciation for assets purchased in 2009.

· Continuing the higher $250,000 limit on expensing assets through 2009. Full expensing will remain available until $800,000 of assets are placed in service this year.

· Extending the renewable energy credits for wind, solar, geothermal, biomass, etc. In addition, Congress will eliminate dollar caps.

· Expanding the work opportunity credit to cover businesses that hire out-of-work youth between ages 16 and 25 or unemployed veterans.

· Read Full Article at Kiplinger.com

Here Come the Tax Cuts