St. Tammany Accountants Are in Demand as More People Cash in on Recession-Driven Tax Credits
Print
The changing fiscal landscape has brought more demand for accounting services - and more interest in the long-term investing opportunities that many of the parish's younger professionals shrugged off in more bullish economic climates.
"People are concerned about their fiscal futures in a way I never saw before," says Randy Spinosa, a certified public accountant in Mandeville, La. Spinosa has long advised clients to consider establishing an individual retirement account. This year, he says, people can't afford not to do it. This upcoming tax season, the IRS will roll back earnings restrictions to allow individuals with a modified adjusted gross income of more than $100,000 to convert a traditional tax-deferred individual retirement account to a Roth IRA. The Roth is preferable to a traditional IRA because it allows you to withdraw contributions at any time, penalty and tax-free, while a traditional IRA mandates that the money be held in the tax-deferred account until the holder reaches retirement age.
"The change means that more people can begin building a nice estate plan now," says Spinosa, who advises all clients who are eligible to open a small Roth account in 2009. Given the current economic uncertainty, it is no surprise the accountant has seen clients saving more and spending less. Yet even with finances tight, Spinosa urges people to spend strategically on tax-credit eligible items such as solar panels, energy efficiency improvements or new homes.
"With tax credits, you have to spend money now to make money later. And if you can do that, it's worth it in the long run," he says.
Take the homeowner tax incentive program that was due to expire in November but recently was extended through June with broadened eligibility requirements. The prolonged incentive means first-time homebuyers, or people who have lived in their home for at least five years out of the past eight, can qualify for a tax credit of up to $8,000. The new version of the program also increases the number of those eligible by raising the ceiling on earnings for participants to $125,000 for a single person or $225,000 for a married couple.
Before the change, singles could not earn more than $75,000, and married couples couldn't earn a joint income greater than $150,000 to qualify for the incentive.
For a cash-strapped family, buying a new house to get $8,000 back in return makes no sense unless the family was already planning a move. But if a move is in the works, then why not do it now and reap the silver lining of a cloudy economy?
"There has to be a reason beyond the credit to buy a house. But if you have the reason, it makes sense to act now," says Ernest Langlinais, CPA and president of Hurst & Langlinais in Mandeville. Another big-ticket item that comes with an even bigger payoff for those who can afford the initial investment is a solar panel system.
"A solar system for your house is going to cost $30,000. You are going to get $20,000 back, but who has $30,000 to spend first?" asks Langlinais. "If the recession is not affecting you, you can take advantage of this. But if it is, it's going to be harder for you. "
For those who do not have the cash lying around for a high-tech green-o-vation, smaller investments in more sustainable systems can also reap returns in the form of tax credits.
Covington accountant Gene Veillon advises clients to make simple purchases such as insulation or new doors and windows. Federal energy efficiency credits passed under the recovery act are worth 30 percent of the cost of improvements up to a maximum of $1,500. For people who already replaced their insulation, doors and windows after Hurricane Katrina, they can take advantage of another 30 percent credit for installing alternative energy systems such as wind turbines or more efficient heating and cooling devices.
In Covington, homeowners have started to consider these options as they strategize how to take advantage of federal incentives without spending unnecessarily, says Veillon.
"I'm not seeing too many people buying the solar or anything that substantial, but I do see people coming in with smaller-ticket items that add up," he says.
But one big-ticket item you don't want your family cashing in on is, well, you.
Congress is considering a move that would repeal the estate tax - also known as the "death tax"- in 2010. Currently, the estate tax is set at 45 percent for estates worth more than $3.5 million, or $7 million for a couple. President Obama's budget proposed freezing the estate tax. But if Congress does not agree to freeze the tax at that level, the levy would disappear completely in 2010 before reverting in 2011 to the higher levy imposed before the most recent round of tax cuts made in 2001.
"Be careful," warns Spinosa. "The way things are going, your kids may want to collect in 2010. "
