Tax Refunds & Advice

Did you recently purchase a diesel powered car? If so, you may be eligible for a tax credit in 2009. This may not be reason enough to purchase a diesel vehicle, but it is definitely an added benefit. Even though there is tax breaks involved with buying a diesel car, you should also be proud of yourself for doing your part in helping the environment.

There are five new diesel cars that use advanced lead burning technology. If you purchased one of these five vehicles you should be well aware of the corresponding tax credit. Not taking advantage of this would be a huge mistake. As you know, the IRS has already implemented tax credits for buyers of several models of electric and hybrid vehicles.

The new diesel vehicles that qualify for these tax credits include:

1. Volkswagen Jetta 2.0L TDI SportWagen. Tax credit: $1,300

2. Volkswagen Jetta 2.0L TDI sedan. Tax credit: $1,300

3. Mercedes R 320 Bluetec. Tax credit: $1,550

4. Mercedes ML 320 Bluetec. Tax credit: $900

5. Mercedes GL 320 Bluetec. Tax credit: $1,800

Anybody who has recently purchased one of the above vehicles is able to take advantage of a tax credit. As you can see, the IRS has placed different amounts on each new vehicle. That being said, anything that can lower your tax liability is something that you want to take advantage of.

If you are in the market for a new car, buying one of the five models above will score you a tax credit while also helping the environment.

Many tax filers are confused when it comes to tax credits and tax deductions. In other words, they think that they are the same thing. And while credits and deductions are similar in some ways, they are not identical. As a taxpayer, you need to know the details of each one and how they can work to your advantage when filing your final return. If you are not sure of how to use tax credits and deductions, you will want to seek the help of a professional.

Tax credits are used to reduce your liability dollar for dollar. In other words, each dollar from a tax credit will lower your tax liability that same amount. As you can imagine, credits are a great way to reduce your taxes and in many cases eliminate your liability altogether. Some of the most commonly used tax credits include: child tax credit, earned income credit, retirement savings credit, adoption credit, and the foreign tax credit among others.

On the other side of things, tax deductions are used to reduce the income on which you pay tax. These deductions are claimed on page one of your 1040. Some of the most popular tax deductions include: IRA deduction, college tuition, mortgage interest, student loan interest, charitable contributions, moving expenses, and business expenses in addition to many others.

Now that you have a better understanding of tax credits and tax deductions, you should be able to file your return with more success and efficiency in the years to come. Remember, both credits and deductions can go a long way in reducing your tax liability. In the end, this allows you to save money. 

What is the EIC?

The Earned Income Tax Credit program was created to give tax help to hard-working, low-income families. For the people who qualify, the Earned Income Credit, or EIC, reduces their income tax bill and may even generate a tax refund for those who did not pay income taxes.

To learn more about claiming the EIC, review the following steps:

Step 1: Find out if you qualify for the EIC
You must meet several requirements to claim the Earned Income Credit on your income tax return. The EIC is one of the most heavily audited tax credits, so it is a good idea to use a qualified tax program or seek professional help before you claim this child tax credit.

If you do claim the EIC, we recommend using an online tax preparation program to prepare your tax return, which will ensure you are qualified and that you’re preparing your tax return correctly. If you prefer to check yourself, you may review the requirements for claiming the Earned Income Credit (EIC) .

Step 2: I’m qualified. How do I claim the EIC?
To claim the Earned Income Tax Credit, you must complete a federal income tax return, even if you don’t owe any taxes or didn’t earn enough money to require filing an income tax return.

However, trying to compute the EIC on your own can be very tricky. There are Internal Revenue Service rules such as AGI and percentage limitations, separate rates, and phase-out limitations; plus, additional considerations if you have child-related Earned Income Credit (EIC) requirements , or if the IRS has ever denied or reduced your Earned Income Tax Credit.

Instead of trying to figure out these complexities on your own, consider using reliable income tax help such as an online tax preparation program , which helps you to best take advantage of the Earned Income Credit. An online tax preparation program helps determine if you are qualified to claim the EIC, and then assists you with preparing your tax returns by laying out all the new tax laws for you, providing all the IRS forms, calculating all the math, and helping answer your tax questions.