CH&Co is a medium sized CPA firm based in Richardson Texas that caters to DFW area businesses. They provide today’s blog discussing end of year tax issues.
In a year filled with economic uncertainty, one thing is certain….year-end is quickly approaching. With that in mind, we would like to take this opportunity to discuss some of the opportunities available to better manage your 2009 tax liability. The American Recovery and Reinvestment Act of 2009 (ARRA) contains several tax provisions that could possibly benefit you, your family, and/or your business.
1. The First Time Homebuyer’s Credit was set to expire on November 30, 2009. However, this refundable credit has been extended to April 30, 2010. For purchases made from January 1 through April 30, 2010, the credit is equal to the lesser of 10% of the residence’s purchase price or $8,000; $4,000 for married filing separately. It also allows a homebuyer who has lived in their current home for five out of the last eight years to receive a $6,500 credit. The credit is reduced to zero for any house that is purchased for more than $800,000. The credit phases out for taxpayers with modified adjusted gross income between $75,000 and $95,000 ($150,000 and $170,000 for joint returns) for the purchase year. There are also other restrictions based on residency and age.
2. Taxpayers who buy a new car or several other types of motor vehicles this year may be entitled to a special tax deduction when they file their 2009 federal tax returns. State and local sales taxes paid on up to $49,500 of the purchase price of qualifying vehicles are deductible. Qualified motor vehicles include new (not used) cars, light trucks, motor homes and motorcycles. Purchases must occur after Feb. 16, 2009, and before Jan. 1, 2010. However, there are phase outs based on the taxpayer’s income.
3. This new law increases the energy tax credit for homeowners who make energy efficient improvements to their existing homes. The credit rate is 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to $1,500 for improvements placed in service during 2009 and 2010. The credit applies to improvements such as adding insulation, energy efficient exterior windows, and energy-efficient heating and air conditioning systems. There are certain requirements that must be met in order to fully take advantage of the credits.
4. ARRA also has provisions that address recognition of income due to cancellation of indebtedness occurring in 2009 or 2010. This type of income can occur when there is a foreclosure or when a loan is substantially modified. Taxpayers can defer recognition until 2014 and then recognize it ratably over a five-year period starting in that year. There are also recent and temporary tax law changes that may provide relief for homeowners with unpaid debt. There are certain restrictions and requirements to follow under these provisions.
5. A qualifying taxpayer can choose to treat the cost of certain property as an expense and deduct it in the year the property is placed in service instead of depreciating it over several years. This property is frequently referred to as Section 179 property.
6. Under ARRA, qualifying businesses can continue to expense up to $250,000 of Section 179 property for tax years beginning in 2009. Without ARRA, the 2009 expensing limit for Section 179 property would have been $133,000. The $250,000 amount provided under the new law is reduced if the cost of all Section 179 property placed in service by the taxpayer during the tax year exceeds $800,000.
7. The new law does not alter the Section 179 limitation imposed on sport utility vehicles which have an expense limit of $25,000.
8. Congress has also extended deductions that were set to expire. The most notable was that Congress has “patched” the AMT exemption amount for 2009.
9. Also, if you fall under the provisions to make a Required Minimum Distribution (RMD), please note that during 2009 those requirements are suspended for 2009 only.
10. Charitable contributions made directly from the taxpayer’s IRA to a qualified charity during 2009 are not included in taxable income.
They can be reached at (972) 644-7112
They can be reached at (972) 644-7112
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