Mar 2010
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Several of the 2009 tax changes favor taxpayers with incomes between $13,440-$135,000. However, the Residential Energy Efficient Property Credit does not have an income limitation, and even includes certain types of roofing in the credit calculation. A more complete list of qualifying home improvements can be found on IRS Form 5695.
2009 TAX CHANGE FILING TIPS:
Higher tax bracket and standard deduction
Even if your taxable income puts you in a higher tax bracket, retroactive applications of 2009 tax changes to activities such as Haiti disaster relief contributions and IRA contributions can save you money using the changes to the 2009 tax brackets. For example, if you are a single tax filer with a taxable income is $40,000, reducing it by $6,050 can reduce your tax by as much as 24.58% or $1,523 based on the 1040 2009 tax table rates. In such case contributing this amount to a 401(k) or 403(b) that is not maxed out can be worthwhile.
Conversion of unused paid time off
In September 2009, the IRS issued a ruling confirming qualified unused paid time off, including sick leave, can be transferred to a 401(k) plan in concord with section 401 of the Internal Revenue Code. In relation to the higher tax bracket above, this unused paid time off may be transferred to a 401(k) plan in order to reduce taxes by lowering tax bracket and taxable income.
New automobile tax deduction
The new automobile tax deduction is good for new vehicles purchased after February 16, 2009 throughout the remainder of the year. A flexible feature of this deduction is that it can be added to the standard deduction or claimed on Schedule A as an itemized deduction. For example, a vehicle costing $49,000 bought in California would allow $4,042.50 to be added to the standard deduction, or line 7 of the 2009 Schedule A.
Making Work Pay tax credit:
To make the most of the Making Work Pay Tax Credit a taxable income of $6451 is ideal because any income higher than this amount does not benefit from the credit, and any income below this amount does not take full advantage of it. Persons who received Government Retiree tax credits such as county pension payments or recovery rebate credits in 2009 can only claim up to $150 for the Making Work Pay Tax Credit for single filing status, and $300 for those who are married filing jointly.
Home buyers tax credit extension
The home buyers tax credit was extended in 2009 giving new and existing home buyers an opportunity to receive up to $8000 in tax credit. What's more, tax credit in excess of taxes due become a tax refund. It's important to note qualification for this credit is based on taxable income before deductions on page 2 of IRS Form 1040 which means reducing taxable income through charitable contributions or other qualified deductions may be essential in claiming this deduction. Homes contracted by April 30, 2010 and purchased by June 30, 2010 may qualify for the deduction on their 2010 tax returns.
©2009