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There's little doubt that 2008 will be remembered as a tumultuous year. Rising food and fuel prices, turmoil in the credit and housing markets, inflation pressures, and the volatility of the stock market all contributed to economic pressures. But buried within the negative headlines was some good news you may have missed. Here's a recap.
Financial help for homeowners
If you're a homeowner, you may benefit from a new income tax deduction. When you're filing your 2008 federal income tax return in 2009, you may be able to take a deduction for property taxes you've paid--even if you don't itemize your deductions. Taxpayers who claim the standard deduction may be able to claim an additional deduction of up to $1,000 if married or $500 if single.
If you're a first-time homebuyer, you may be able to take a refundable tax credit of 10% (up to a maximum of $7,500 or $3,750 for married persons filing separate returns) of the purchase price of a home you've purchased after April 8, 2008, and before July 1, 2009. However, this credit is phased out for individuals with adjusted gross incomes ranging from $75,000 to $95,000 ($150,000 to $170,000 if married filing jointly). And keep in mind that this tax credit functions more like a loan--you'll need to repay the credit over 15 years in equal installments on your annual tax return (possibly sooner if you sell your home or don't use it as your main residence).
New ways to manage college costs
Student loans staged a disappearing act in 2008, as the credit crisis drove some lenders out of the student loan market and forced others to become more selective. But the Higher Education Opportunity Act, which became law in August, contains several provisions that will help families and students better manage the high cost of college. These will be phased in during 2009 and in future years. Some highlights:
Expanded education benefits for the military
August 1, 2009, marks the debut of a new GI bill, which has been hailed as the first major expansion of education benefits for the military since World War II. Active duty service members (including members of the Guard and Reserve) may be eligible for the new program. Education benefits will be payable for up to 36 months, and will cover tuition costs and fees. Eligible veterans may also receive a monthly stipend for books and supplies, and a monthly housing allowance. In some cases, benefits may even be transferable to spouses and dependent children. You can find more information on the Department of Veterans Affair's website, www.gibill.va.gov.
New "green" vehicles
Gas-saving vehicles have been rolling off assembly lines for several years. Up until now, most have been passenger cars, and smaller SUVs and trucks. But these are now sharing the road with larger and sportier models, including a hybrid version of an infamous gas guzzler--the Cadillac Escalade. Admittedly, the 2009 Escalade's estimated 20 mpg city isn't going to break any fuel conservation records, but its emergence is a sign that Detroit is focused on developing even more fuel efficient vehicles in 2009 and beyond, due to growing demand.
As in previous years, when you purchase a qualified hybrid or other alternative fuel vehicle, you may be entitled to claim a tax credit when you file your federal income tax return. This credit will reduce your tax bill dollar-for-dollar. You can find a list of qualified vehicles on the IRS website, www.irs.gov.
The road to recovery is paved with good intentions--and probably new legislation
Will an economic recovery take place in the first half of 2009, the second half of the year or even later? No one knows for sure. But economic woes will likely result in new initiatives and relief measures, so keep your eyes open for developments on the road ahead.
The 360 Degrees of Financial Literacy Web site offers general information for managing personal finances and does not recommend specific financial actions. For financial advice tailored to your situation, please contact an expert such as a CPA or a personal financial advisor.