Earlier this year, the American Recovery and Reinvestment Act (ARRA 2009) was passed, and it contained quite a few tax incentives that were only good for this year.  Since we’re coming down to the last three months of the year, I thought it would be appropriate to highlight those provisions that will be expiring this year.  Click on the title link for each section to be taken to the original article I wrote about the provision.

First-Time Homebuyer Credit

This provision expires on December 1, 2009.  This is a credit of up to $8,000 on either an original or amended 2008 tax return, or a tax return filed for 2009 – but the purchase must be closed by December 1, 2009.  To be eligible, you must not have owned a principal residence during the past three years prior to the purchase date of the new home.  Further, this deduction is phased out for MAGI above $75,000 for singles, $150,000 for married individuals.

New Vehicle Purchase Incentive

State and local sales tax are deductible on the purchase of new cars, light trucks, motor homes, and motorcycles.  The deduction is limited to the tax on up to $49,500 of the purchase price of each qualifying vehicle.  The MAGI phaseout for this credit is at $125,000 for singles and $250,000 for married filing jointly.  This provision expires on January 1, 2010.

Reduced Withholding

The “Making Work Pay” Credit lowered withholding tax for most employed individuals earlier this year.  This provision is set to expire on December 31, 2009.  The important point of this provision is that if your tax situation is somewhat complicated – for example, if you have more than one wage-paying job, both spouses in the household work, or if you can be claimed as a dependent by another taxpayer – you should review your withholding now to determine if you’ve had enough withheld throughout the year.  Otherwise, you could inadvertently have an underpayment penalty, receive a much lower refund than you expected, or possibly even owe taxes when you anticipated a refund.