Tax Tips for Filing Your 2009 Income Tax Returns

With the recession of 2009 showing signs of recovery, I am sure most of you are happy to tear off the December 2009 page of your calendar. I want to share some tax changes that you might find of interest as you get ready to file your 2009 tax returns.

In February 2009, the American Recovery and Reinvestment Act of 2009 was signed into law. There appears to be something for everybody and hopefully some of the following changes may help you save some tax dollars.

The first time homebuyer’s credit was recently extended. Originally the credit applied to property purchased by December 1, 2009. Recently the date for the property acquisition was extended to April 1, 2010. There is an additional 2 month provision for closing on the property until July 1, 2010 as long as a firm commitment to purchase is effective as of April 1, 2010. The credit is 10% of the purchase price with a maximum $8,000. Unlike the 2008 credit of $7,500, this credit does not have to be repaid!

Another recent home buyer’s credit is available to present homeowners who have lived in their homes for five consecutive years out of the last eight years. The credit is 10% of the purchase price with a maximum of $6,500. Homes priced above $800,000 are not eligible and the home must be purchased after November 6, 2009 and before April 30, 2010. The maximum income limit on a joint return to be eligible for the credit is $225,000.

In other available benefits, buyers of new vehicles can deduct the sales tax paid on the purchase, even if they do not claim sales tax as an itemized deduction. Sales tax on the first $49,500 of cost qualifies and covers vehicles purchases between February 17, 2009 and December 31, 2009. There are also limits based on your adjusted gross income.

The deduction for real estate tax continues in addition to the standard deduction for those who do not otherwise itemize their deductions. The maximum deduction on a joint return is $1,000.

For 2009 and 2010 the Hope credit is replaced by a new credit of up to $2,500 per student a year for four years of college, not just the first two years as in the past. It also includes the cost of books. There is a phase out for joint return filers whose adjusted gross income is over $160,000 and if the credit is more that your income tax liability, 40% of it is refundable. Incidentally, the state of Pennsylvania permits deduction for contributions to Sec 529 education plans of up to $13,000 per beneficiary per taxpayer per year. Thus a joint return filer could deduct $26,000 for the year 2009.

There is a Residential Energy Efficient Property Credit is available in 2009 for 30% of the cost of eligible property. There is no annual limitation on the amount you spend. People who take the deduction are advised to obtain the manufacturer’s certification that the property qualifies for the credit.

Another benefit provided by the American Recovery and Reinvestment Act allows for an individual to exclude up to $2,400 if unemployment compensation benefits were received during 2009.

Small Businesses

The Section 179 expensing of property deduction has been increased to $250,000 of eligible property with a qualifying property limitation of $800,000 before any reduction of the credit occurs.

A special (bonus) depreciation allowance equal to 50% of the adjusted basis of qualified property is allowed for both regular and AMT tax. The asset must be new tangible property with a MACRS recovery period of 20 years or less.

As usual the tax brackets, standard deduction and personal exemptions have been adjusted upward as the phase out levels for certain deductions. Personal and partnership returns are due by April 15, 2010. Corporation income tax returns are due by March 15, 2010. Corporation returns other than calendar year returns are due 75 days after the fiscal year end. I will available to meet with you Monday through Saturday during normal working hours and I can be available for evening appointments is needed.

Need some help?

If I can be of help I will work with you and help you to realize all the tax benefits available and help you to pay the least income tax possible. Please contact my office to set up an appointment.

I hope you find this information of some value.