When President Obama signed the Worker, Homeownership, and Business Assistance Act of 2009 into law last week there was anaudible sigh of relief from the real estate industry.

The first-time buyers’ tax credit that was set to expire Nov. 30 has been credited with causing the modest bump in home sales we’ve seen the past few months.

Under the new law anyone who hasn’t owned a home in the past three years can claim a credit worth 10% of a home’s purchase price, up to $8,000.

Buyers can qualify by signing a sales contract between Nov. 7, 2009 and April 30, 2010, and closing on the purchase no later than July 1, 2010.

The act allows buyers with higher incomes to take advantage of that credit, too.

Under the original law, individual buyers could earn no more than $75,000, or $150,000 for couples filing jointly, to qualify for the full $8,000 credit.

Now, buyers making up to $125,000, or $250,000 for couples, can do so.

The new act also includes a tax credit of up to $6,500 for individuals and families who have lived in their homes for at least five years and want to move.

The deadlines are the same as for the first-time buyers’ tax credit — contract by April 30, closing by July 1.

Both credits require the home to be a principal residence and to cost no more than $800,000.

These tax breaks are particularly valuable because they’re credits, not deductions.

Deductions reduce your taxable income and lower the amount you owe in taxes by about 25 cents to 33 cents per dollar.

Tax credits are subtracted from the amount you owe the government. That means every dollar worth of tax credits lowers your tax bill by a full dollar.

If the credit is more than the tax you owe, you’ll be paid the difference.

Although buyers were able to file an amended 2008 tax return to claim the first-time homebuyers’ credit before the deadline was extended, a spokesman for the Internal Revenue Service told us that may change once details of the new bill’s implementation are worked out.

The IRS is also currently determining whether or not homeowners will be able to file an amended return to claim the new credit for existing homeowners.

To qualify you must close on your purchase before Dec. 1.

If you don’t have a sales contract in hand, and mortgage application in the works, by mid-October you’ll be racing to meet that deadline.

The homebuyer’s tax credit has been a popular part of the economic stimulus bill Congress passed last winter — the American Recovery and Reinvestment Act of 2009.

It allows most buyers who haven’t owned a house in at least three years to claim a credit of 10% of a home’s purchase price, up to $8,000.

You can apply the credit to your 2009 return, or an amended 2008 return, even if you don’t itemize deductions.

Unlike a deduction, which reduces the gross income used to calculate how much you owe, a credit comes right off the bottom line of your tax bill.

So while a $1 deduction might cut your taxes by 25 or 30 cents, depending on your tax bracket, a $1 credit will reduce what you owe the government by a full $1.

If you don’t owe any tax or if the credit comes out to be more than the tax you owe, you’ll be paid the difference.

Unlike the previous, $7,500 first-time buyers tax credit created by the Housing and Economic Recovery Act of 2008, none of this money must be paid back.

Nearly 315,000 homebuyers have already claimed the tax credit using an amended 2008 tax return, according to a recent Treasury Department report.

More than 42,000 of those claims came from California. Another 29,000 were from Florida and Texas.

Unlike a deduction, which reduces the gross income used to calculate how much you owe, a credit comes right off the bottom line of your tax bill. So while a $1 deduction might cut your taxes by 25 or 30 cents, depending on your tax bracket, a $1 credit will reduce what you owe the government by a full $1.

The stimulus bill created two types of energy credits.

The energy efficiency tax credit covers improvements to existing homes, from new windows and furnaces, to additional insulation in the attic.

Homeowners receive a credit worth 30% of what they spend on materials, and some installation costs, up to a limit of $1,500, for purchases made in 2009 and 2010.

The renewable energy tax credit is for adding geothermal heat pumps, solar water heaters, solar panels, fuel cells and windmills to new or existing homes.

This credit is for 30% of the total cost of the project, including installation. There’s no limit on how big the credit can be and it doesn’t expire until the end of 2016.

The government’s Energy Star Web site has all the specifics on the projects and products that qualify for both credits.

Click here for a summary of all of the tax credits and other consumer benefits in the economic stimulus plan.

You almost have to cringe when IRS Commissioner Doug Shulman says: “The IRS will do everything it can to help during these tough times.”

But the Internal Revenue Service says it will be more lenient with taxpayers who are struggling to make their payments.

The new policies apply to those with older delinquent tax bills as well as people who may be struggling to pay their 2008 taxes due to job loss, illness or other hardship.

If you call the IRS with a problem, employees have more leeway to:

Postpone or suspend collection actions on delinquent accounts. If you’ve recently lost your job, had a serious illness or have only a low fixed income, such as Social Security, you may get a reprieve that will halt those nerve-wracking collection calls.

Give you more time to make up missed payments. The IRS usually cancels installment agreements if a taxpayer misses a payment. Under the more lenient rules, agents can reduce your monthly amount or forgive a skipped payment right over the phone. The same goes for those struggling to make payments on an Offer in Compromise agreement, where the IRS has previously agreed to forgive part of a delinquent bill.

Review the value of your home. Some people couldn’t negotiate a reduced payment plan because they had too much home equity. Given the dive in real estate values, the IRS will reconsider whether your home value really is enough to prevent you from getting a compromise deal.

Stop seizing your money. The government will refrain from garnishing your paycheck or bank accounts if you can prove financial hardship. When you call the IRS to ask for a reprieve, be sure to have your bank or employer’s tax identification number and any levy paperwork you’ve received.

This type of trust can provide substantial benefits for those seeking long-term, multigenerational planning, such as the type designed to avoid the generation-skipping transfer tax. It can also protect against divorce, creditors and estate taxes. Any parent that is currently gifting assets to their children on any kind of regular basis should seriously consider establishing one of these trusts. The key difference between this type of trust and other trusts is that the beneficiaries must be willing to talk openly with their grantors regarding how they want the money invested or handled.

In order to establish an inheritor’s trust, an empty, irrevocable dynasty trust must be established first. The inheritor is more often than not the trustee, and must usually choose a close friend or confidant to be the distribution trustee. This trustee has absolute control over what kind of distributions is made from income and principal. However, this transference to a third-party trustee is exactly what makes the assets of the trust so secure from creditors. Beneficiaries have absolutely no legal right to force any kind of distribution from the trust, which renders creditors unable to force any type of distribution from the trust as well. It is important to select the correct state to create the trust in, as the validity of these trusts will vary according to state law.

But taxpayers that own municipal bonds may be able to use those assets to generate capital losses without altering the overall allocation of their assets. This is a common strategy used by many brokers and investment consultants who have clients that have substantial capital gains or other reportable investment income to declare on their returns. The swapping process itself is fairly simple. Any investor who owns a municipal bond that is currently trading at a discount, meaning less than it’s par, or issued value, owns a security that is trading at a loss. However, bonds issued by different municipalities often have very similar characteristics, such as rate, term, and call features, so exchanging one bond for another will seldom affect the composition of the investor’s portfolio. But this exchange effectively allows the investor to declare the sale of the old bonds at a loss, while maintaining portfolio integrity. For example, assume that a bond investor bought 10 public school bonds at par (which is listed as a price of $100) when the school originally issued them. This means that his original investment amount was $10,000. Now, a year and a half later, interest rates have risen, and the price of the bonds in the secondary market is now $92 per bond. The broker who sold him the bonds will find 10 other municipal bonds from a similar issuer with similar features and “swap”, or exchange them within the portfolio. The replacement bonds may well be trading at a loss as well, but this is largely irrelevant, as the new bonds will vary in price the same as the old bonds. But the investor will be able to declare a long-term capital loss of $800 on his tax return, as he bought the original bonds for $10,000 and sold them for $9200.

The alternative minimum tax (AMT) is a tax that could be more than the regular income tax. Congress’s logic for the AMT was to stop individuals with high incomes from using special tax breaks and thus paying little or no tax at all. However, more and more taxpayers are finding themselves subject to the AMT, even though they don’t have extraordinarily high incomes or use many special tax benefits.

The Taxpayer Advocate Service, an independent organization within the IRS, reported that the AMT affects substantial numbers of middle-income taxpayers and will, absent a change of law, affect more than 30 million taxpayers by 2010. Inflation is a big reason more and more individuals may be hit with the AMT since the threshold for AMT doesn’t move automatically with inflation unlike the rest of the tax regulations.

Especially exposed are those with incomes between $100,000 and $500,000. However, don’t think that just because your income is less, you won’t have a problem. In the coming years, the share is expected to expand the most for taxpayers with incomes between $50,000 and $500,000.

The AMT has its own rules that are not as generous as the regular rules to determine how much a taxpayer should pay. If you are paying at least that amount, you don’t have to worry about the AMT. But if your regular income tax is below the AMT, you’ll have to pay the extra tax.

There are a number of items that cause you to have an AMT liability. These include:

· Exemptions for a spouse and dependents

· Medical expense deductions

· State and local taxes, including property and income taxes

· Interest on second mortgages, unless the money was used to buy, build, or improve the home

· Interest on home equity loans, unless the money was used for home improvements

· Miscellaneous itemized deductions

· Certain credits

· Capital gains

· Incentive stock options

· Tax-exempt interest from private-activity bonds

· Tax shelters

Tax planning is the key to making sure that you pay no more than necessary, whether you are subject to the standard rules or AMT rules. For instance, you may find that you might have to pay the AMT in some years but not others. One strategy would be to “bunch” some of these deductions, such as miscellaneous itemized deductions and medical expenses, in non-AMT years, since they won’t be of benefit in years in which AMT applies. It is strongly recommended that all investors consult with their own qualified tax and financial advisors prior to making any investment decisions.

1. This process is completely open to the public. Anyone who wishes to find out everything about your estate once you’re gone will have complete freedom to do so. Thanks to modern technology, a complete listing of your assets will probably be available online for the world to see.
2. As stated before, this process is totally beyond your control-and the control of your spouse or other prospective heirs. You may assume that all assets will simply go to your spouse, but this is usually not the case. Most states will automatically divide your assets equally between your spouse and your children, regardless of whether your children are ready to take ownership of their share.
3. Probate also offers anyone wishing to contest your will an opportunity to do so. This, of course, can lead to expensive legal proceedings that drag on for months. The costs involved in this will also be borne by your heirs.
4. There are many possible expenses that can be incurred in the probate process, including court costs, appraisal costs, executor’s fees, legal and accounting fees, and even surety bond fees in some cases. The typical cost of probate can often run between 3 to 7 percent of the value of the estate (and much more in some cases.)

Of course, your retirement assets are probably the last source of assets that you want to draw on in the event of a financial hardship, but at times you may have no choice. At all costs you would like to avoid the 10% early withdrawal penalty inherent in any kind of premature distribution. However, the IRS has allowed for several exceptions to this rule over time, although the rules for traditional and Roth IRAs versus qualified plans differ somewhat. These exceptions can be broken down as follows:

Traditional IRA:

• Death
• Total and permanent disability
• 72(t) distribution (a series of substantially equal and periodic payments)
• IRS levy of the plan
• Medical expenses
• Qualified higher education expenses
• First-time homebuyer expenses up to $10,000
• Health insurance premiums for the unemployed

Roth IRA:

• The same exceptions as for the Traditional IRA, except for the first-time homebuyer exception

Qualified Plans

• All of the exceptions that apply to Traditional IRAs
• Separation from service from your employer at age 55 or later
• Distributions made to your ex-spouse due to a qualified domestic relations order (QDRO)
• Dividend distributions from employee stock ownership plans (ESOPs)

The IRS has allowed these exceptions as both a means of relief and encouragement. The relief comes for the dead, divorced and disabled, while those who are trying to better themselves through education or trying to purchase a home can receive encouragement in the form of penalty-free distributions. Of course, these exceptions fall into a different category than other more common penalty-free transactions, such as rollovers or transfers between accounts or plans.

By definition, an equity-indexed annuity is currently considered a cross between a fixed annuity and a variable contract. These vehicles allow investors to participate in a set percentage of the gains of the stock market without any downside risk. A minimum guaranteed rate is usually also included.

Of course, there are a great many competent, legitimate agents and advisors who work with equity indexed annuities and match them appropriately with their clients’ needs. Unfortunately, there has also been a growing trend among some insurance agents and brokers to aggressively market these contracts to senior citizens as the only viable investment alternative available to them in these uncertain times. There are also numerous crediting methods used by many different insurers to determine the return on capital for the investor. While this type of annuity can offer higher returns than traditional fixed annuities, it also often contains a number of provisions that investors can find very confusing. For example, many equity-indexed contracts have very long surrender periods, such as 12 or even 15 years. While many of these products contain an initial free-look period that may last up to two years, they can become substantially illiquid once this period has expired. Contractholders that need to liquidate their investment after the free-look period and before the end of the contract term can face early withdrawal penalties of up to a whopping 35%, plus forfeiture of all gains within the contract. However, many companies will now allow investors to withdraw up to 10 or 15% of their contract value each year without penalty.

Prospective investors should carefully consider both the benefits and drawbacks of these complex instruments. While indexed annuities can be an excellent vehicle for some investors, those who may need greater liquidity may want to consider other alternatives.