This section describes
the significant
changes for Tax Year
2009.
SIGNIFICANT CHANGES FOR TAX YEAR 2009
New Laws!
2009 Rule Changes – Keep these in Mind while you gather records
Some of the rules you knew for 2008 are different for 2009.
Look for Documentation! Most of the items here are new. IRS has the job of
policing tax laws. They will be required to check (audit) some returns claiming new
benefits. Face it – some folks who are not entitled will try to take advantage of the
new laws, and IRS will be looking for them. For our mutual protection I’ll be
copying/scanning more documents this year. If we face an audit, I’d like to
know we can quickly settled any doubts.
First-Time Homebuyer Credit: If you bought a home in 2009 before December 1,
there might be a BIG credit for you. If you didn’t own a “principal residence” inside
the US for a full three years prior to buying the home, you get 10% of the cost
(capped at $8000) as a direct tax rebate. There’s talk of extending the program, but
as I write this, it ends after November 30.
Sales Tax On New Cars. If you bought a new car (not a used car) after February
16 this year, there is a valuable deduction for any sales or excise tax you paid. You
get it even if you don’t normally itemize your deduction. I’ll want to see a copy of the
purchase contract.
Government Retirees, may get a special $250 tax credit this year. If you
collect any government pension for work that was exempt from social security you
may qualify. This can include school districts, libraries, law enforcement – any
government work at all. You can lose the credit id you collect social security or if you’
re still working.
Non-Filers. There’s a catch – you must file a tax return to get this credit. Perhaps an
older member of your family earned a government pension, but no longer need to file
tax returns. I can help this person collect $250 – but a 2009 tax return MUST be files.
Home Energy Credit. Two different kinds of credits here.
Conservation. Energy-saving improvements to your main home can cut your taxes in
2009 and 2010. Main home only – not for rental or vacation properties. You get
30% of the first $5,000 you spend in ’09-’10 for installing new insulation, doors,
windows, skylights, certain furnaces, heat pumps, and air conditioners. IRS says you
can rely on the munufacturer’s statement that a given device qualifies. I recommend
you keep the brochure, or print out the information from their website.
Generation. Bigger credits apply if you generate energy. Solar systems, fuel cell
equipment, wind and geothermal devices give a 30% credit. There’s no upper limit.
The credits apply for any property where you reside, even a vacation home. These
are definitely more expensive projects. This credit is available through 2016. With
both credits you may count costs of materials, plus costs to install.
College Expenses. Special credits have been available since 1997. But, rules for
2009 and 2010 are more liberal than ever. The only problem is we must segregate the
costs into several categories.
General Costs. First: Tuition and fees for college classes. Schools send out Form
1098-T in January reporting tuitions paid. It’s sent to the student’s address, but
credits belong on the return claiming the student’s “personal exemption”. Usually it’s
the parents return. In 2009 and 2010 there’s a new benefit. You can also claim costs
for books, course materials, and class supplies. That’s our second category. The
credit can be up to $2,500 – full rebate of the first $2,000. It phases out for higher
incomes, but income limits are higher than in the past.
College Savings Plans. If you set up a “section 529” plan to pay for your child’s
education, you must show that withdrawals were spent on education, or you can face
a tax. The costs above count, but you may also add room and board – third category.
For 2009 and 2010 there’s a fourth category. You can claim costs for the student’s
computer, software and on-line fees.
Over 701/2 IRA Rules. Two special rules if you have “mandatory distributions”
from you IRA. Both are set to expire this year, but could be extended.
No 2009 Distribution. You are free to not take any distribution this year. Take as
much or as little as you wish. This was intended to help compensate for dramatic
losses in financial markets. However, it also offers a planning opportunity. If you have
not yet taken a distribution, you might be able to take some amount at lower tax rates.
Directly To A Charity. If you have your IRA Custodian send a check to a charity,
the amount can be excluded from your income. You don’t need to itemize deductions,
so you get full value for the gift.
Non-Itemizers. If you don’t have many tax deductions, we use the “standard
deduction”. For 2009 there are two deduction, you can claim even if you can’t
itemize.
1. Sales tax on new cars bought after February 16, 2009.
2. Up to $500 of real estate taxes on any property you own ($1,000 for a
couple). Please be sure to remind me if either of these apply to you.
Mortgage Insurance: Last year for this one. Form 1098 will show the interest you
paid on your mortgage. It should also show any mortgage insurance. We can deduct
this along with the interest.
Foreclosures. If you lost property this year, I need lots of details. Your problems are
not income tax issues. You might have income form the cancellation of the mortgage.
Official forms may have arrived – 1099-A and/or 1099-C. I must see these. I’ll need
as much information as possible about what happened. I need to know the complete
history of loans for the property. It will help if I can see the last few mortgage
statements. These cases involve more than simply tax law, so please be as thorough
as possible.
Miscellaneous Items. A host of other provisions are set to expire after 2009. We
can deal with these at the time of filing your return.
Businesses. Liberal rules for depreciation were extended for 2009. Vehicle
deductions are normally limited by “luxury car caps”, but for 2009 we can claim an
extra $8000 in the first year you own the car.
Hybrid Car Credits are drying up. No more credits for Honda and Toyota/Lexus
vehicles. Ford and Mercury hybrids get full credits for purchases before April, 2009.
From April 1 to September 30, the credit is 50%. As of October 1, it’s 25%. Full
credits still apply for hybrids from GM, Mazda, and Nissan.
2010 Withholding Issues. I’d like to check your withholding. For the first time in
history IRS adjusted withholding tables mid-year.
A 2009 program gives special tax credits to most workers. Instead of sending
checks, IRS was told to take less withholding. They revised the table in April.
Problem: for many folks, the withholding reduction is greater that their tax credits.
They must pay back the difference at tax time. Folks with multiple jobs (or families
where both spouses work) got too much take home pay. Folks with civilian pensions
get no credits, but had less withholding.
Table for 2010 are also reduced. Will you have too little withheld? I can help, but I
need to know your withholding “status”. You filled out Form W-4 (W-4P for
pensions). Your asked to be treated as either “single” or “married”, and claimed some
“allowance”. Find this information and I can help.
Prepare Early. This will be a special year. We don’t want to miss anything. Prepare
carefully, and there are two benefits: (1) You’ll see the maximum tax savings, and (2)
my fee will be as low as possible. We may even have a little time to plan for future
savings!
Santos Associates, FEDERALLY AUTHORIZED TAX PRACTITIONERS, can help you
with your accounting, tax and financial planning needs. Call today for an appointment &
consultation. We are not attorneys, we can refer competent council upon request.
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