Sacramento CPA, Tax, Accounting, Bookkeeping
New Tax Laws for 2009
There are several new programs for 2009. First is the work pay tax credit. This tax law gives a $400 tax to working people ($800 for couples) and is handled by your employer through new tax withholding schedules. Second, social security recipients will receive a one time $250 payment in June. Third, retired government workers will receive a $250 credit on their 2009 tax return. If social security recipients and government retirees work, the work pay tax credit is reduced.
The payments for social security recipients and government retirees are a one time tax credit; whereas the work pay tax credit applies to 2009 and 2010. This tax credit is limited to 6.2% of earned income with a maximum of $400. The tax credit phases out between $75,000 and $95,000 for a single taxpayer and double the amount for married taxpayers.
Sales Tax
You can deduct the sales tax on new cars purchased on or after February 17, 2009. You can only deduct the tax on the first $49,500 and the tax deduction will phase out once your income reaches $125,000 for a single taxpayer or $250,000 for married taxpayers. If you don’t itemize your tax deductions, you will still get the sales tax deduction.
Unemployment Income
If you collect unemployment tax in 2009, you will only be taxed up to the first $2,400.
Homebuyer Credit
In 2008, taxpayers received a homebuyer tax credit. This was for first time homebuyers who didn’t own a home in the past three years. You could receive 10% of the home value up to a maximum of $7,500. This was an interest free loan that had to be repaid over 15 years. The new tax credit applies to home purchases in 2009 before December 1. The taxpayer can receive up to a maximum of $8,000 with no repayment unless the home is no longer your main home within three years.
Energy Credit
Energy tax credits for 2009 apply to insulation, exterior doors, windows, skylights, insulated roofing materials, non-electric furnaces, and water heaters. There’s a $1,500 tax credit limit for 2009 and 2010.
Hope Credit
The hope tax credit is now called the “American Opportunity Tax Credit. The tax credit increases from $1,800 to $2,500 and covers 4 years of post secondary education. Taxpayers will begin to lose the credit as income reaches $80,000 for a single taxpayer and $160,000 for married taxpayers. You will still get the credit if you pay alternative minimum tax.
Section 529 Plans
Section 529 plans are college savings plans. The money grows tax deferred and must be used for the costs of education. The new tax law allows for these funds to purchase a computer.
Depreciation
Businesses may elect to expense a maximum of $250,000 of equipment. In 2009, there’s bonus depreciation which allows businesses to write off an additional 50% of the asset and then depreciate the remainder.
Net Operating Loss
Businesses that produce a net operating loss can carry back the loss to the three previous years. The new tax laws allow the business to carry back the loss to a 4th and 5th year.
Investment Losses
Investment losses will be treated like business losses due to certain Ponzi schemes. In order to claim the loss, the perpetrators must be under indictment.
Other Income
Other sources of income could include cancellation of credit card debt and home foreclosure. If you negotiate a reduction in credit card debt, this is taxable income. If a bank sells your property for less than the bank is owed, this shortfall may be taxable income.
Cobra Coverage
If an employer has more than 20 employees, he must provide COBRA coverage to all involuntary terminated employees for up to 18 months. The new tax law gives employees up to nine months of coverage by paying 35% of the premium. The government will pay the other 65%.
IRA Minimum Distributions
Taxpayers are required to take annual distributions from their IRA and retirement accounts when they are over 70 ½. In 2009, the requirement is waived.
Credit Card Charges
If you charge your tax bill via credit card, there’s a 2.5% fee. In 2009, taxpayers can deduct this fee on their tax return, but it’s a miscellaneous itemized deduction limited to 2% of your total income.
Donation of IRA
Taxpayers can donate part of their IRA to charity with no tax consequences, but 2009 is the last year to do this. You can have your IRA custodian send a contribution directly to the charity from your IRA. You only have to pay tax on the additional distribution.