Average U.S. tax refund is up 9% over a year ago

March 31, 2009|By EILEEN AMBROSE

It's good to be average this tax season. That's because the average federal refund is up 9 percent over a year ago.

The typical refund as of March 6 is $2,811, compared with $2,576 for a similar period a year ago, the latest figures from the Internal Revenue Service show.

Thank some new tax breaks as well as inflation adjustments to more than two dozen items, including tax brackets.

"If your income was the same year over year, it is possible that you could be in an even lower tax bracket and your tax would be lower," says Barbara Weltman, author of J.K. Lasser's 1001 Deductions & Tax Breaks.

You can track your refund on the IRS Web site at www.irs.gov under "Where's My Refund." If you haven't filed yet, don't overlook these tax breaks:

Bigger standard deduction Homeowners who pay state and local real estate taxes but don't file an itemized return will get a larger standard deduction. Besides the standard deduction, you can get the amount paid in real estate taxes last year, but not more than $500 for singles and $1,000 for joint filers.

This benefits longtime homeowners who have paid off their mortgage or those who bought a house late last year and haven't paid much mortgage interest, says Jackie Perlman, tax analyst with H&R Block's Tax Institute.

Rebate recovery Remember last year's tax rebate? Taxpayers got checks of up to $600 for singles and $1,200 for joint filers based on information on their 2007 tax returns. If you didn't qualify or you didn't get the full credit, you might be able to claim it now on your return if your finances have changed.

First-time homebuyer credit A credit worth up to $7,500 is available to those who bought a house between April 9 and Dec. 31 last year. This credit must be repaid over 15 years, making it an interest-free loan. It starts phasing out once income exceeds $75,000 for singles and $150,000 for joint filers.

Originally, the credit extended into 2009, but February's stimulus act changed things.

Now, if you buy your first home between Jan. 1 through Nov. 30 this year, you will be eligible for a credit of up to $8,000 that doesn't have to be repaid. You don't have to wait until next year to claim it. If you buy a house after you file your 2008 taxes, you can amend your return.

Some recent buyers claimed the $7,500 credit though they are eligible for the larger one. In these cases, you can cash the refund check, the IRS says. But make sure you amend your 2008 return so you can claim the extra $500 and let the IRS know that your credit does not have to be repaid.

IRA contributions You have until April 15 to contribute to an individual retirement account for 2008. The maximum contribution is $5,000 or $6,000 if you're 50 or older.

Your ability to deduct contributions to a traditional IRA is reduced if you are covered by a plan at work. Deductions start phasing out once income hits $53,000 for singles and $85,000 for joint filers.

Contributions to a Roth IRA are never deductible, but you won't pay taxes on any gains when you pull the money out in retirement.

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