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New
legislation, the Worker, Homeownership
and Business Assistance Act of 2009,
which was signed into law on Nov. 6, 2009,
extends and expands the first-time homebuyer
credit allowed by previous Acts. The new
law:
Under the new law, an
eligible taxpayer must buy, or enter into a
binding contract to buy, a principal
residence on or before April 30, 2010 and
close on the home by June 30, 2010. For
qualifying purchases in 2010, taxpayers have
the option of claiming the credit on either
their 2009 or 2010 return. For the first
time, long-time homeowners who buy a
replacement principal residence may also
claim a homebuyer credit of up to $6,500 (up
to $3,250 for a married individual filing
separately). They must have lived in the
same principal residence for any
five-consecutive year period during the
eight-year period that ended on the date
the replacement home is purchased. |
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The American Recovery and Reinvestment
Act (Recovery Act or ARRA), enacted earlier this
year, includes:
First $2,400 of
Unemployment Benefits Tax Free for 2009
Every person who receives unemployment
benefits during 2009 is eligible to exclude
the first $2,400 of these benefits when they
file their tax return next year. For a
married couple, the exclusion applies to
each spouse, separately. Thus, if both
spouses receive unemployment benefits during
2009, each may exclude from income the first
$2,400 of benefits they receive.
Nonbusiness Energy Property Credit
This credit equals 30 percent of what a
homeowner spends on eligible energy-saving
improvements, up to a maximum tax credit of
$1,500 for the combined 2009 and 2010 tax
years. The cost of certain high-efficiency
heating and air conditioning systems, water
heaters and stoves that burn biomass all
qualify, along with labor costs for
installing these items. In addition, the
cost of energy-efficient windows and
skylights, energy-efficient doors,
qualifying insulation and certain roofs also
qualify for the credit, though the cost of
installing these items does not count.
By spending as little as $5,000 before the
end of the year on eligible energy-saving
improvements, a homeowner can save as much
as $1,500 on his or her 2009 federal income
tax return. Due to limits based on tax
liability, other credits claimed by a
particular taxpayer and other factors,
actual tax savings will vary. These tax
savings are on top of any energy savings
that may result.
Residential Energy Efficient
Property Credit
Homeowners going green should also check out
a second tax credit designed to spur
investment in alternative energy equipment.
The residential energy efficient property
credit, equals 30 percent of what a
homeowner spends on qualifying property such
as solar electric systems, solar hot water
heaters, geothermal heat pumps, wind
turbines, and fuel cell property. Generally,
labor costs are included when calculating
this credit. Also, no cap exists on the
amount of credit available except in the
case of fuel cell property. |
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Additional Standard Deduction for
Real Estate Taxes
There is an additional standard deduction
for those who don’t qualify to itemize their
tax deductions, but who do pay state or
local real estate taxes. This deduction is
available for the 2008 and 2009 tax years.
The additional deduction amount is equal to
the amount of real estate taxes paid. The
amount can be up to $500 for single filers
or up to $1,000 for joint filers. |
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IRS ONLINE WITHHOLDING CALCULATOR: Make sure you have your (& spouse's) most recent pay stub & most recent tax return available to help you complete information. This calculator is especially helpful for two-income households to make sure they are getting the right withholdings taken from their pay.
Access IRS Withholding Calculator. |
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USAGE OF AUTOMOBILE FOR BUSINESS:
Beginning on Jan. 1, 2009, the standard
mileage rates for the use of a car (also
vans, pickups or panel trucks) will be:
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WORKING STUDENTS: You are exempt from federal income withholdings and you can be claimed as a dependent by your parents IF : total 2009 income will not be over $5,500 or your unearned income (interest, dividends, etc.) will not exceed $850 and you had no income tax liability for 2008. If you paid social security & Medicare taxes (7.65% of earned income), this will not be refunded. If you do have federal taxes taken out of your income for p/t, summer jobs, file your taxes to get a refund . If no refund & made less than $5,000 with no interest or dividends, there's no need to file. If you are under 24 years old & a student, your parents can claim you no matter how much you earn. But when student files, they
should not claim themselves. |
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CHILD CARE & SUMMER DAY CAMP EXPENSES (child must be under 13 years old): The cost of child care creates a credit against any tax liability. The credit ranges from 20% - 35% depending on your income. The 35% rate applies if your Adjusted Gross Income (AGI) is under $15,000 & 20% if your AGI is over $43,000. The maximum child care deduction is $3,000 for one child and $6,000 for two or more. This will be multiplied by the rate (20% to 35%) resulting in your tax credit. Under dependent care assistance plan where child care dollars are excluded from income, maximum is $5,000 for one child and $10,000 for two or more children. To get the deduction you must have the provider's SS# or EIN#. Without this, the exempt money will be taxed. Note: If AGI is less than $15,000 use credit method. |
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ADVICE TO NEWLYWEDS: Your marital status on December 31 determines whether you are considered married for that year. If you change your name, let the Social Security Administration know your name change. Use their SS-5 Form . Newlyweds may find that they now have enough deductions to itemize on their taxes. Amounts paid for medical care, mortgage interest, charitable contributions, casualty losses and certain miscellaneous costs can reduce your taxable income, lowering your tax. Note: If both are wage earners, lower your exemptions to single & zero, as the second salary is taxed at a higher rate. |
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SELLING YOUR HOME:
You may exclude up to $250,000 for single or
$500,000 for married taxpayers filing
jointly from your profit of the sale.
Your home must have been owned by you and
used as your main residence for a period of
at least two out of the last five years
prior to its sale. If you DO NOT meet
the ownership and use tests, you may be
allowed to use a reduced maximum exclusion
amount if you sold your home due to health,
a change in place of employment or
unforeseen circumstances (includes divorce
or disaster resulting in a casualty to your
home). |
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HOMEOWNERS:
making the January 2010 mortgage payment in December 2009 (early enough for the bank to get and record the payment in 2009) will save you about $500 in Federal income taxes. Example: if your mortgage interest is $2000 a month and you are in the 25% tax bracket, the savings in tax avoidance would be $500. |
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CAPITAL LOSSES:
Have stocks that are losing money and you
have not sold them yet? Why not sell
enough to record a $3,000 loss (max. allowed
in one year, any amount greater becomes a
carry over). In a 25% tax bracket this
equals $750 and would reduce your Adjusted
Gross Income, which would lower your
limitation for Misc. Deductions 2% and
Medical 7.5%, giving you a greater Itemized
Deduction amount. If you don't want to
sell any stocks because you feel that they
will come back to the original prices, you
can sell the stock to create your tax loss
for the current year and buy the stocks back
after 30 days giving you a lower base
(purchase price) or you can buy the stock
one day (equal amount of shares) before
selling the stock. Only you must use
an average cost of the total stock in hand. |
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TRANSPORTATION AND/OR AUTO EXPENSES: You can claim travel to and from your doctor, hospital, clients, specialist, drug store or for therapy is deductible at 18 cents per mile for travel for medical reasons. Even if the specialist is 300 miles away, that airfare and hotel is deductible and if you had a minor child that required the specialist, the trip for the parent or any person over 21 that is escorting this minor child is deductible. |
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OTHER THAN CASH CHARITY: If you have old clothes in good or very good condition, don't throw them out. Note: Used underwear is disallowed! Bag them and call either the Salvation Army
( click here for a location ), St Mary's Church in Newark, NJ, Goodwill Industries ( click here for a location ) OR Vietnam Vets of American (1-800-775-VETS). Any one of these groups have pick ups and will give you a receipt. You must list and value the items. Items can range from clothing, books, old computer equipment, household items and even an old car (that you couldn't get rid of). Values could go up to $4999 without a certified appraisal and can be listed on Form 8283. This could amount to a substantial tax avoidance for you. Of course, you must itemize your tax return to get this deduction. Y |
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USED VEHICLE donations are deductible whether running or not such as cars, boats, snowmobiles, RVs, motorcycles, jet skis, etc. The charity will often pick up your car, sell it at the best price & give you a receipt for the full amount to deduct on your taxes. Here are some charities that participate The American Heart Association , The American Diabetes Association or Kars4Kids to name a few. You may want to find out what percentage of the donated proceeds actually go to the charity cause. |
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ESTIMATED STATE TAX PAYMENTS : Making the last payment (due Jan 15, 2010) by December 2009 will make a deduction for 2009. |
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MISCELLANEOUS DEDUCTIONS: (total expenses must exceed 2% of your AGI) there are many expenses that are tax deductible that most taxpayers are not aware of. Some of the are as follows: |
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- Energy efficient windows will get you a $200 tax credit (this is for 1 or 100 windows).
- New roof, furnace, solar energy will get you up to a $2,000 credit
- Doors & air conditioners (limited to $300 tax credit)
- Water heater or any other energy efficient improvement qualifies for a $500 credit.
- Form 5695 is used to claim these credits. It must be an improvement to an existing residence. It cannot be taken on new homes.
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There are many more deductible expenses that the average person is not aware of. That is why 90 million taxpayers have their returns prepared professionally.
Give us the opportunity to help you. We will, in almost 100% of the cases, save you more than enough money to cover the cost and put some dollars in your pocket or reduce the taxes you may owe. |
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