Only a Few Days Left to Save on Your Taxes
Decisions this week can affect your 2009 bill. Here are tips on taking available credits, deductions
By Jim Mackinnon
Beacon Journal business writer
Published on Wednesday, Dec 30, 2009
Taxpayers have just a few days left to get their finances in order to reduce 2009 tax bills. So, time is of the essence. Here are some tips from Fairlawn accounting firm Bober Markey Fedorovich:
FOR INDIVIDUALS:
First-time homebuyer credit
The First Time Homebuyer Credit was expanded on Nov. 6 and allows a first-time homebuyer a refundable tax credit of up to $8,000. It also allows a person who has been in his or her main residence for at least five years to receive up to $6,500 for the purchase of a new main residence. To qualify, the home must be purchased or under contract by April 30, 2010, and must close by June 30, 2010.
Elimination of required minimum distribution for IRAs
The required minimum distribution for IRAs and defined contribution retirement plans was eliminated in 2009 to allow retirement accounts to rebound from the declining stock market. Required distributions resume in 2010.
Deduct sales and excise taxes on new vehicles for 2009
You may deduct the sales and excise taxes imposed on the purchase of a new car or light truck up to $49,500. You do not need to itemize. No deduction is allowed if gross income is over $135,000 (or $260,000 if married filing a joint tax return). This expires at the end of 2009.
Go ''green'' and earn a credit
You might qualify for a tax credit for purchasing certain energy-efficient items such as high-efficiency air conditioners, water heaters, windows, doors, insulation materials and certain roofs. This credit is 30 percent of the cost of the equipment up to $1,500. The credit is available for both 2009 and 2010.
'529' college savings plan distributions for computers
You may take money out of a ''529'' college savings plan to pay for computers and other related educational expenses. This includes Internet access and related services used by the student. This is available for 2009 and 2010.
Up to $2,400 in unemployment compensation excluded from income for 2009
If you received unemployment compensation in 2009, you may now exclude up to $2,400 from your income. This tax provision is only available in 2009.
Teachers deduct supplies for 2009
Teachers have an above-the-line deduction for teaching supplies available for 2009. If you have not spent up to $250 this year, you might want to stock up on supplies to capitalize on this deduction; the provision expires at the end of 2009.
FOR BUSINESSES:
Last chance to take advantage of higher limits on purchased property
Businesses can deduct the full price of qualifying property purchased or financed during the same tax year up to $250,000. This amount will decrease to $134,000 in 2010. The limit for total amount of equipment purchased is $800,000.
Bonus depreciation to expire next year
Businesses that exceed the $250,000 deduction limit can take bonus depreciation on new (and certain leased) property of 50 percent on the amount that exceeds the limit and then also take normal depreciation on the rest.
Qualified building improvements eligible for quicker depreciation in 2009
Certain non-residential leasehold (a fixed asset) improvements to buildings older than three years can be depreciated more quickly than will be allowed in 2010, as long as they are not part of common areas, structural framework or enlargement of the property. Qualifying leaseholds are eligible for the 50 percent bonus depreciation. Restaurant buildings and retail businesses are subject to additional qualifiers.
Five-year ''NOL'' carrybacks not just for small businesses
Net operating losses, or ''NOLs,'' generated in 2008 or 2009 for almost any type of business are allowed to be carried back up to five years in 2009. Normally, carrybacks (refunds of prior taxes) are limited to two years and are only available to eligible small businesses. Unless 2008 was carried back before Nov. 6, 2009, only one year's NOL — 2008 or 2009 — is eligible for extended carryback. NOLs carried back the full five years are limited to 50 percent of the taxable income in that year.
Defer recognition of income
Most tax planning boils down to deferring tax liability and accelerated expenses. Businesses operating on the accrual basis of accounting can change to the cash method and could be allowed automatic IRS approval going back to the beginning of the year.
Self-employed retirement plans
If you are self-employed, setting up a retirement plan before year's end will let you deduct contributions that don't need to be paid until next fall. The only exception is what's called a ''SIMPLE'' plan, which had to be set up by Oct. 1. Exact rules need to be followed.
Make sure you have invested enough to offset losses
If your business is an ''S'' corporation, partnership or ''LLC,'' you need to understand that losses will be limited to amount of money invested in the business.
Don't forget about ''AMT''
The alternative minimum tax can be more of a problem for individuals than corporations. However, some of the items that can make a business subject to it are net operating losses and depreciation issues.