Tax Tips: 2 New Don't Miss Forms
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In an effort to boost the economy by lining the pockets of some taxpayers with cash, the federal government provided a few new tax breaks for 2009. To get in on your share of the governments largess, you'll need to be familiar with two little known tax forms - Schedule M and Schedule L. Here's what you need to know:
Schedule M - Making Work Pay and Government Retiree Credits
In 2009 and 2010, the Making Work Pay provision of the American Recovery and Reinvestment Act provided a refundable tax credit of up to $400 for working individuals and up to $800 for married taxpayers filing joint returns.
In 2009 many folks benefitted from this credit via reduced payroll tax withholding since spring 2009. But to lock in your credit -- which reduces your 2009 taxes by $400 if you're single or $800 if you're married/file jointly -- you have to claim the credit on your 2009 tax return. You'll need to use the new Schedule M to do this.
The credit is equal to 6.2 percent of your earned income, capped at $400 or $800. For single filers, it starts phasing out at $75,000 of adjusted gross income and is not available if AGI exceeds $95,000. The phase-out AGI for marrieds is $150,000 to $190,000.
Bottom Line: Read, complete and include Schedule M with your 2009 tax return. If you qualify, you get a $400/$800 tax credit.
Schedule L - Standard Deduction for Certain Filers
New in 2009 is a Vehicle Sales & Excise Tax deduction. I like this one for a couple reasons. First, a lot of people bought a new car during the 2009 Cash for Clunkers program, so many of those people will be able to benefit from this deduction. And secondly, it allows taxpayers to take a deduction for state and local sales taxes paid on the purchase of a new vehicle, and it's available whether or not a taxpayer itemizes deductions on their Schedule A. You can't deduct the cost of the vehicle, but you may be able to deduct the cost of the sales tax.
Here is how it works: If you bought a new car, truck, motorcycle, or motor home after Feb. 16, 2009, and before the end of 2009, you can deduct the sales tax paid -- up to a maximum purchase price of $49,500 per vehicle -- as an itemized deduction or, if you claim the standard deduction, as an increased standard deduction.
The benefit begins phasing out for married couples with adjusted gross income above $250,000 and singles with AGI above $125,000. It is completely gone for single filers with AGI of $135,000 or more and joint filers with AGI of at least $260,000.
Bottom Line: Non-itemizers need to file a Schedule L with their taxes to get the benefit, which is nly good for the 2009 tax year. Itemizers who elect to deduct state income taxes will claim the car sales tax as a separate itemized deduction.
Another item on Schedule L is the State and Local Real Estate Tax Deduction
This is relatively new (introduced in 2008) so some people might not know how to claim it.
Here's how it works: People who ordinarily don't itemize deductions -- meaning they typically don't have enough deductions to exceed their standard deduction amount -- typically do not get any additional tax deductions for the property taxes they pay. But now they can, even if they don't itemize.
A new law passed in 2008 lets you increase your standard deduction by up to $500 if you're single and up to $1,000 if you're married and filing jointly to account for property taxes paid during 2009.
Bottom Line: If you don't itemize deductions and are eligible, you'll need to complete and include Schedule L with your 2009 tax return to get a break on your property taxes.
More tax tips on MoneyWatch:
Weirdest Tax Break: Midwest Colleges?
Tax Tip: Cut Taxes for Your Heirs
Lower Your Taxes in Retirement
View all articles by Ray Martin on CBS MoneyWatch»
Ray Martin has been a practicing financial advisor since 1986, providing financial guidance and advice to individuals. He has appeared regularly as a contributor on the CBS Early Show, CBS NewsPath, as a columnist on CBS Moneywatch.com and on NBC-TV's morning newscast TODAY. He has also appeared on the Oprah Winfrey Show and is the author of two books.
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