January 1, 2010
RE: 2009 Tax Update
We have snow on the ground at the beginning of 2010! This is a first for us. We’re writing this letter to highlight some of the changes that may affect your 2009 tax return. These topics are not meant to be all inclusive, but instead a general guide that may affect the majority.
The first-time home buyer credit was extended. The rules are complex so we are advising you to discuss this credit directly with us.
A real estate tax deduction has been passed for non-itemizers for 2009. Real estate taxes paid can be taken as a deduction in addition to the standard deduction up to $500 for singles and $1,000 for married couples filing jointly.
There is a credit available called the Making Work Pay Credit for tax years 2009 and 2010. This credit has been released to taxpayers during the year via reduced federal income tax withholding for wages. Self Employed business owners will receive the credit on the tax return when filed. The credit can be up to $800 for marrieds and $400 for singles. Retirees have a special credit of $250 they received earlier in 2009.
For purchasers of new cars or trucks less than $49,500 there is a special sales tax deduction from taxable income in 2009 only.
A new tuition credit is now available called the American Opportunity Education Credit. The maximum credit is now $2500 per year and applies to all four years of college. This replaces the Hope Credit and part is now refundable if the taxpayer qualifies. This credit also has AGI limitations as well. Planning for this is recommended.
The standard mileage rates for 2009 have decreased. The rate for business mileage is 55¢. The rate for medical and moving mileage is 24¢. Congress sets the charitable mileage and it remains at 14¢ a mile. Parking and tolls are in addition to mileage.
The standard mileage rates for 2010 have decreased. The rate for business mileage is 50¢. The rate for medical and moving mileage is 16.5¢. Congress sets the charitable mileage and it remains at 14¢ a mile. Parking and tolls are in addition to mileage.
The gift exclusion amount is $13,000. A married couple can give their child or friend up to $26,000.
The Federal Estate tax is currently set to expire January 1, 2010 for one year. On January 1, 2011 the estate tax is set to reinstate at a one million dollar exemption amount and a 55% top rate. The House passed the Permanent Estate Tax Relief for Families, Farmers and Small Business Act of 2009 on December 8, 2009. In this bill was a three and half million dollar exemption and top rate of 45%. The Senate is waiting to vote where it wants a five million dollar exemption and top rate of 35%. As you can see this presents difficult financial stress for some families with assets greater than one million.
We advise you take seriously that there is a high likelihood that the estate tax will not be changed retroactively to January 1, 2010 and that Congress is unconcerned about the financial burden it places on hard working and responsible families and business owners in this Land of Opportunity.
Please don’t hesitate to call or send an e-mail if you have any questions for us or want further analysis on the information above. We look forward to visiting with you and preparing the best possible return for you in 2010!
Lawrence R. Yoder, CPA