What are Build America Bonds (BAB)?

Build America Bonds are part of the federal stimulus plan and provide a 35% rebate on interest costs to issuers or a tax credit to investors, at the issuer’s discretion. What this means is, because of the 35% federal government return, it turns into a lower borrowing rate despite of the fact that it draws a higher taxable financing cost to the issuer.

While a BAB could draw a higher taxable financing cost to the issuer than a tax-exempt bond, the 35% federal government giveback turns it into a lower borrowing rate.

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Quick Tips for a Tax Rebate

Credits of Note
Two special tax credits worth noting for 2008 are the recovery rebate and first-time homebuyer credits.

Deductions You Want to Consider
Even though credits save you more than deductions, you still want to take deductions when you can.

Finally, exemptions are another area of tax breaks to know about. There is a personal exemption of up to $3,500 available to most taxpayers. If you’re lucky enough to work for an employer that offers Qualified Transportation Fringe Benefits, you also don’t have to pay income taxes on these benefits. Additionally, if you are in the military, any pay you received while serving in a combat zone in 2008 is exempt from income tax.