TAX CREDIT EXTENDED-It's official
President Barack Obama has signed into law the The Worker, Homeownership, and Business Assistance Act of 2009 which extended the tax credit of up to $8,000 for qualified first time home buyers purchasing a principle residents and a $6,500 tax credit to Move-Up home buyers who have owned a home for at least 5 years.
It has been extended through April of 2010. The credit can also be used to help pay for closings costs as well as meet the FHA 3.5% downpayment requiremnets (Consult with one of our Approved Lenders). The credit can also be used to change your clients paycheck withholdings so that they can save for a downpayment quicker for those conventional loans.
State's tax withholding bump-up starts today
Some call it California'scash advance. Effective today, the amount of state income taxes withheld from California workers' paychecks will increase 10 percent. That might sound like a tax increase, but state officials insist that's not the case. Tax experts agree, saying this bump up in withholding taxes gives the state some wiggle room in managing California's treasury in a year that saw a titanic political battle to get a handle on the state's budget. The increased withholding comes on top of a 0.25 percent state income tax increase and a reduction in the dependent credit, also enacted as part of the state budget.
Essentially, the accelerated withholding program does not generate additional tax revenue. Instead, it front-loads it, bringing cash in more quickly in an effort to keep the state treasury stocked with funds, which is where the "cash advance" tag comes in. State officials have estimated that the move will generate an additional $1.7 billion in the current fiscal year. The bottom line is that a worker's total annual income tax bill won't rise, and the amount owed at April 2010 tax time will be adjusted accordingly.
Simply put, if you owe taxes when April 15 comes along, the balance due will be less based on what was withheld from your paycheck in the last two months of the year. If you're due a refund, you can expect a little more. Taxpayers can evade the accelerated withholding schedules simply by increasing the number of allowances on the withholding forms filed with their employers. That won't make much difference for the calendar 2009 tax year, but it will have a bigger impact for 2010 and perhaps beyond.
Besides increased withholding, a state income tax increase approved by the Legislature as part of February's budget deal will raise rates by 0.25 percentage points for each tax bracket for the 2009 and 2010 tax years.
Also in the mix: A new tax law lowered the state dependent exemption credit from last year's $309 to $98 for the 2009 and 2010 tax years.
Please consult and verify withyour tax adviser regarding the above tax information.