TAX CHANGES FOR 2010:
ENERGY CREDITS
The non-business energy property credit will be available for property placed in service in 2009. The credit is available for property such as high-efficiency heating and cooling systems, water heaters, windows, doors, and insulation. There is no limit on the amount of qualified solar electric property costs when figuring the residential energy efficient property credit.
FIRST-TIME HOME BUYER CREDIT
Home buyers who purchased in 2009 can get a credit of up to $8,000 with no payback requirement. The time limit to qualify has been extended to April 30, 2010. If you enter into a binding contract by April 30, 2010, you have until June 30, 2010 to close the escrow. You are a first time home buyer if you have not owned a primary residence during the three years up to the date of purchase. If you are a member of the armed forces you have an extra year to qualify. There are income limits associated with this credit. There is also a credit for existing home owners who decide to “Move Up” to a newer, more expensive home.
UNEMPLOYMENT BENEFITS TAX FREE IN 2009
Up to $2,400 of unemployment benefits may be tax free this year. If you received unemployment benefits you’ll get a form showing the amount paid to you. Normally this is a taxable amount. That has changed this year.
FORECLOSURES, SHORT SALES, OR ABANDONMENT OF PROPERTY
If you experienced a foreclosure, short sale, or abandonment of property you owned, you’ll be getting a form in the mail from the lender. The form will be a 1099-A or 1099-C. Depending on the circumstances you may have a taxable event (cancellation of debt income) for your income tax return. Some of the details of the mortgage forgiveness debt relief law are changing by the week so we’ll talk about it when I see you. If this happened to you please have the paperwork on the property available at our appointment.
THE “AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009”
This is a very large piece of legislation and affects various aspects of our tax lives. It is a piece of work to be sure. If you think that any of the thousands of details of this act may apply to you please make a note of it and we’ll see if it works for your situation.
VICTIM OF A PONZI SCHEME???
Some of you were victims of Ponzi schemes and/or outright Fraud. There was a lot of that going around in 2009. For that matter, it’s still going on. If you lost money on investments there is some consolation. Depending on the type of investment you may be able to deduct those losses on your tax return. Generally a capital loss (bad investment) is carried forward at the rate of $3,000/year. In the case of a Ponzi, there are other choices. We can discuss that at the appointment.
HEALTH CARE EXPENSES
With a lot of people having reduced total income this year a greater portion of your health care expenses may be deductible. This would be the year to run those expenses through your tax return and see what happens. Please have a list of anything you feel may be a health care expense along with as many receipts as possible for those deductions. This would include things like health insurance premiums, medicare premiums, co-pays, travel, dental, acupuncture, hearing aids, eyeglasses/contacts, fertility treatments, pregnancy tests, mental health treatments, stop smoking/drinking programs, home modifications for medical reasons, eldercare, and care for the disabled.
ESTATE TAX (Death Tax)
Most relatively simple estates do not require the filing of an estate tax return. A filing is required for estates of $3,500,000 for decedents dying on or after January 1, 2009.
DEPENDENT-CARE EXPENSES
This credit is now worth 20-35 percent of your dependent-care costs up to $3,000 for one child or $6,000 for two children. IRS has changed the definition of “Earned Income” to figure this credit so you may be getting a larger credit.
CAPITAL GAINS TAX AND DIVIDENDS
The maximum 15% rate for long term capital gains and qualified dividends has been extended through 2010. The 0% rate for taxpayers in the 10% or 15% ordinary income tax brackets will apply in 2009 & 2010.
TAX LAW CHANGES FOR SMALL BUSINESS
The limit on the section 179 expense deduction is $250,000 for qualified property.
STANDARD MILEAGE RATE
Business rate is 55 cents per mile. Medical and moving mileage is .24 per mile. In service of charity it’s .14 per mile.
HEALTH SAVINGS ACCOUNTS (HSA)
A health savings account can be established by individuals who meet certain requirements. Generally, contributions to an HSA are deductible and remain in your account from year to year until they are used. Earnings on amounts in an HAS are not taxed, and distributions for qualified medical expenses may also be tax free. In general, you can contribute up to the amount of your insurance deductible subject to specified limitations. Additional amounts may be contributed by individuals who are age 55 or older.
SALE OF PERSONAL RESIDENCE ACQUIRED IN A LIKE-KIND EXCHANGE
Taxpayers who convert rental property to a principal residence in a “Like Kind Exchange” must now wait five years to sell the converted property to qualify for any capital gains exclusion.
ALTERNATIVE MOTOR VEHICLE CREDIT
This replaces the “Clean Fuel” Credit. Take a credit if you place an alternative motor vehicle (Hybrid) in service during the year. There are restrictions on this credit depending on the car you buy and when you bought it.
ENERGY CREDIT
Take a credit for the purchase of qualified energy efficient improvements to your home.
ROLLOVERS BY NON-SPOUSE BENEFICIARIES
A non-spouse designated beneficiary may have a distribution from an eligible retirement plan of a deceased employee directly transferred (trustee-to-trustee) to an IRA set up to receive the distribution. The transfer will be treated as an eligible rollover distribution.
REAL ESTATE TAX DEDUCTION
There is an additional standard deduction for those who don’t itemize. You can get up to $1,000 even though you don’t file an itemized deduction schedule A.
SPECIAL SALES TAX DEDUCTION FOR VEHICLE PURCHASE
You may be able to take a special sales tax deduction if you purchased a new vehicle between 2-17-09 and 12-31-09. There are limitations depending on your adjusted gross income and the cost of the vehicle. Have the purchase documents available at our appointment.
Note: This is just the short list. If you have a specific question on what the tax laws may do or not do for you, give me a call.
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