2010 Holiday Tax Update

Added 11/30/2009

If you are going to be eligible to start receiving Social Security benefits, contact the Social Security Administration 3 months before your eligibility date. You may also do so by calling 1-800-772-1213 or reduce processing time by applying online at www.ssa.gov. Click on “Filing Online for Retirement Benefits”.


YOUR TAX DEDUCTIONS:

 

HIGHLIGHTS OF TAX LAW CHANGES:

 

1. CAPITAL GAIN RATE
The tax rate on long term Capital Gains and Qualified Dividends is zero(0)%, if you are in the 15% or lower bracket, in 2009 and 2010.
 

2. ADDITIONS to STANDARD DEDUCTION
There are several items that are additions to the Standard Deduction for 2009. You do not have to itemize on your return to take these additional deductions. The Real Estate Tax Deduction has been extended into 2009. This is an addition to the Standard Deduction of up to $500 for a single filer and $1,000 for joint filers for Real Estate Taxes paid. Another addition is for sales tax paid on the purchase of a new vehicle. The deduction is for purchases after Feb.16, 2009 and before Jan 1, 2010. The deduction is limited to the tax paid on a sale up to $49,500. The vehicle must qualify and there are income phase out limits.
 

3. UNEMPLOYMENT COMPENSATION EXCLUSION
Up to $2,400 of Unemployment Compensation benefits received in 2009 are excluded from income.
 

4. ECONOMIC RECOVERY PAYMENTS
If you receive Social Security benefits you may have been eligible to get a $250 Economic Recovery
Payment. This payment is not income. We do need to know if you received the payment as it may impact other credits.

5. DEPRECIATION CHANGE
The limit for Section 179 expense increase to $250,000 has been extended to 2009. This amount is reduced if total assets placed in service exceed $800,000. 50% Bonus Depreciation is also available for 2009. To qualify the property must be new, have a depreciation life of 20 years or less and be purchased and placed in service in 2009.

6. FIRST TIME HOMEBUYER CREDIT
A first time homebuyer is entitled to a refundable tax credit for a home purchased in 2009. The credit is 10% of the home purchase price up to a maximum of $8,000. The credit is reduced to $4,000 for Married Filing Separately. A first time homebuyer is any person that has not owned a principal residence for three years before the current purchase. This credit does not have to be repaid. The credit can be claimed on a 2009 or amended 2008 return.

7. OTHER CREDITS
The Earned Income Credit has been increased for families with at least three qualifying children. The Hope Education Credit has been replaced with the American Opportunity Credit. This credit is  available for the first four years of postsecondary education. Several residential energy credits are back for 2009 and 2010. These include credits for certain energy-efficiency improvements to your home.

 

FROM PENNSYLVANIA …
Pennsylvania had several items to be aware of for 2009. PA will not allow the 50% bonus depreciation in 2009. The PA maximum Section 179 deduction is limited to $25,000. The PA Property Tax rebate program will continue in 2009. Older taxpayers that pay real estate taxes, and have eligibility income of $35,000 or less can claim the rebate.

 

 


WHAT TO BRING TO YOUR TAX APPOINTMENT

1. State and local tax booklet or label including envelopes.
2. Federal, state and local estimated payment vouchers.
3. W-2's, 1099's, SSA statement or business records if you are self-employed.
4. Social security cards for you, your spouse and dependents.
5. Date of birth for taxpayer, spouse and all dependents.

See you next year in 2010!