Post on 13-Jan-2015
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Hot Tax Tips 2010
January 28, 2010
Christine Elsea Mandojana, CPA
Agenda
Major 2008 Tax Law Changes Major 2009 Tax Law Changes What’s Ending? What’s Beginning?
Major 2008 Tax Law Changes
Major 2008 Tax Law Changes
Renewed and Expanded national/refundable tax credit for first-time homebuyers and move-up buyers
Limitations on exclusion of gain (Sec 121) from sale of principal residence
Additional standard deduction for state and local real property taxes paid in 2009
Cancellation of Debt Income—Exclusion for Certain Home Mortgages
State & Local Sales Tax Deduction Tuition & Fees Deduction Educator’s Expense Deduction Temporary Itemized Deduction for PMI
Equivalent to an interest-free loan equal to 10% of home purchase price (up to $7,500)
Taxpayers must pay back loan beginning two years after home purchase tax year and over 15 year period/equal installments
MAGI Phase-outs: MFJ = $150k to $170k;Others = $75k to $95k
Restrictions: can’t buy from close relative, receive as gift or inherit the property; and can’t sell or cease to be primary residence before end of purchase tax year; recapture is accelerated if taxpayer disposed of the residence or it ceased to be the taxpayer’s (or spouse’s) principal residence during the 15-year period
First-time homebuyer definition: cannot have owned another main home during 3 years prior to date of purchase
Major 2008 Tax Law ChangesThe Evolution of the First-Time Homebuyers Credit
Applies to home purchased between:April 9, 2008 and December 31, 2008
Refundable credit for up to 10% of home purchase price (up to $8,000 or $4,000 for Single)
Taxpayer does not pay back the credit unless the taxpayer disposes of the residence, or the residence ceases to be the taxpayer’s (or spouse’s) principal residence, during the 36-month period beginning on the date of purchase
MAGI Phase-outs: MFJ = $150k to $170k; Others = $75k to $95k
Restrictions: can’t buy from close relative, receive as gift or inherit the property
First-time homebuyer definition: cannot have owned another main home during 3 years prior to date of purchase
Major 2008 Tax Law Changes
The Evolution of the First-Time Homebuyers Credit
Applies to home purchased between:January 1, 2009 and November 30, 2009
Major 2008 Tax Law Changes
The Evolution of the First-Time Homebuyers Credit
Applies to home purchases with closing date b/w:January 1, 2009 and June 30, 2010
Extended & E
xpanded!!
Refundable credit for up to 10% of home purchase price (up to $8,000 or $4,000 for Single)
First-Time Homebuyer cannot have owned another principal residence during the 3-year period ending on the date of the purchase of the principal residence
Long-Time Residents have owned the same home for any 5-consecutive-year period during the 8-year period ending on the date of the purchase of a subsequent principal residence
Refundable credit for up to 10% of home purchase price (up to $6,500 or $3,250 for Single)
Taxpayer must have a binding contract to purchase before May 1, 2010 and must close on sale before July 1, 2010
Taxpayer does not pay back the credit unless the taxpayer disposes of the residence, or the residence ceases to be the taxpayer’s (or spouse’s) principal residence, during the 36-month period beginning on the date of purchase
MAGI Phase-outs: MFJ = $225,000; Single = $125,000 Restrictions: can’t buy from close relative, receive as gift
or inherit the property; taxpayer > 18; purchase price < $800,000
Major 2008 Tax Law Changes
The Evolution of the First-Time Homebuyers Credit
Applies to home purchases with closing date b/w:January 1, 2009 and June 30, 2010Extended &
Expanded!!
Members of the Military and qualifying Foreign Service and Intelligence Community members serving outside the US now have an extra year to buy a principal residence in the US and qualify for the credit!!
Eligible taxpayer must enter into a binding contract to buy a principal resident on or before April 30, 2011 and must close on or before June 30, 2011
Eligible taxpayer must serve on qualified official extended duty service outside the US for at least 90 days during the period beginning after 12/31/2008 and ending before May 1, 2010
Credit repayment/recapture is waived for eligible taxpayers if the home is sold or stops being the taxpayer’s principal residence after 12/31/2008 due to government orders received by the taxpayer (or spouse) for qualified official extended duty service
Major 2008 Tax Law Changes
The Evolution of the First-Time Homebuyers Credit
Applies to home purchases with closing date b/w:January 1, 2009 and June 30, 2010
New Milit
ary, FSO &
Intel Benefit
s!!
Helps homeowners who claim the standard deduction
Homeowners can claim an additional standard deduction up to the lesser of the real estate taxes paid or $500 for single and $1,000 for MFJ filers
Real taxes paid must meet same requirements for itemized deduction (i.e., based on value of property)
If you own but rent your property, then you cannot take this additional deduction because you are already claiming the real property taxes on your Schedule E
Major 2008 Tax Law ChangesAdditional Standard Deduction for State and
Local Real Property Taxes Paid in 2009
Sec 121 gain exclusion amended to limit gain exclusion to period home used as principal residence
Gain related to period of time home rented or used as second home is no longer excluded (for periods starting in 2009)
Exceptions for Military, US Foreign Service, US Intelligence community, and Peace Corp
Major 2008 Tax Law ChangesLimitations on Exclusion of Gain from Sale
of Principal Residence
Sec 121 Gain Exclusion: You can exclude capital gain up to $250,000 for single and $500,000 for MFJ on sale of a principal residence you owned and lived in the last 2 out of 5 years. You cannot exclude gain up to depreciation required by law. Ten-Year suspension period in effect for military, US Foreign Service, Intelligence community, Peace Corps. Other exceptions may apply.
Major 2008 Tax Law Changes
Cancellation of Debt Income—Exclusion for Certain Home Mortgages
Tuition and Fees Deduction Above-the-line deduction for tuition and fees is extended
through 2009 Higher AGI limits than other education benefits ($4,000
deduction for AGI at or below $65,000 or $130,000 MFJ; $2,000 for AGI b/w $65,000/$80,000 or $130,000/$160,000 MFJ)
Lifetime Learning and American Opportunity Credit (modified HOPE) are still available at lower MAGI
Provision allowing individuals to exclude from income up to $2 million ($1 million Single) of qualified principal residence indebtedness cancelled b/c of their financial condition or decline in value of the residence—extended through 2012
Major 2008 Tax Law Changes
Educator’s Expense Deduction
Temporary Itemized Deduction for PMI
Above-the-line deduction for expenses paid by qualifying K – 12 grade teachers and other qualifying educators
Up to $250 Extended through 2009 Only US educators qualify
Qualified mortgage insurance premiums paid are deductible as mortgage interest expense
Deduction extended through 2010 (started in 2007) MFJ phase-out begins at $100,000 AGI and Single at
$50,000 AGI
Major 2009 Tax Law Changes
Major 2009 Tax Law Changes
Making Work Pay Credit Qualified Tuition Program Eligible Expense
Definition Expanded New American Opportunity Tax Credit (Modified
HOPE credit) New Vehicle Sales Tax Deduction Special (Bonus) Depreciation
Major 2009 Tax Law Changes Making Work Pay Credit
Expanded Eligible Expense Definition for 529s
Applies to tax years 2009 and 2010 Calculated as the lesser of 6.2% of an individual’s earned
income or $400 ($800 MFJ) Phase-out begins at MAGI of $75,000 ($150,000 MFJ) No credit for MAGI at or above $95,000 ($190,000 MFJ) Credit implemented during 2009 with reduced income tax
withholding schedules; some MFJ with two incomes may need to return some or all of the credit due to MAGI thresholds
Applies to tax years 2009 and 2010 Previously, eligible expenses paid out of QTPs were:
tuition, fees, books, supplies, equipment required for enrollment or attendance, expenses for special needs services, and room and board costs (subject to limit) for at least half-time students
Now, includes expenses paid or incurred for the purchase of any computer technology or equipment or Internet access or related services (computer software for sports, games or hobbies doesn’t count)
New American Opportunity Tax Credit
Major 2009 Tax Law Changes
Modifies the HOPE tax credit for 2009 and 2010 Up to $2,500 (100% of 1st $2,000 expenses and 25% of
next $2,000) per eligible student per year for qualified tuition and related expenses paid for each of the first 4 years of the student’s post-secondary education in a degree or certificate program
Tuition and related expenses definition expanded to include course materials (previously tuition and academic fees only)
MAGI phase-out b/w $80,000 and $90,000 ($160,000 and $180,000 MFJ)
40% refundable for non-child taxpayers (0% refundable to child taxpayers subject to kiddie tax)
New Vehicle Sales Tax Deduction
Major 2009 Tax Law Changes
Applies to qualified new motor vehicle purchases b/w Feb 17, 2009 and Jan 1, 2010
Allowed for taxpayers using either the itemized or standard deduction
Taxpayers using the itemized deduction can add qualified sales tax to state and local taxes OR include in other general sales tax claimed
Taxpayers using the standard deduction add the qualifying sales tax to their 2009 standard deduction
Qualified motor vehicle sales taxes are State or local sales or excise taxes imposed on the purchase of a qualified motor vehicle cost not exceeding $49,500
A qualified motor vehicle is either a passenger auto, light truck or motorcycle less than 8,500 lbs or a motor home. The original use of the vehicle must commence with the taxpayer
MAGI phase-out: $125,000 to $135,000 ($250,000 to $260,000 MFJ)
Bonus Depreciation
Major 2009 Tax Law Changes
Applies to qualifying MACRS property acquired after Dec 31, 2007 and placed in service b/f Jan 1, 2010
Qualifying MACRS property is generally new property depreciable under MACRS and has a recovery period of 20 years or less
Bonus Depreciation equals 50% of the adjusted basis and taken in the placed-in-service year
Opt-out available
What’s Ending?
What’s Ending?
After 2009
Above-the-Line Tuition and Fees Deduction Educator’s Expense Deduction New Vehicles Sales Tax Deduction Additional Standard Deduction for Real
Estate Taxes
2003 Investment Tax Cuts Child Tax Credit of $1,000/qualifying child
reverts to $500 New American Opportunity Tax Credit Making Work Pay Credit Expanded Eligible Expense Definition for
QTP Bonus Depreciation Temporary Itemized Deduction for PMI First-Time and Long-Time Resident
Homebuyer’s Credit (unless qualifying Military, FS or Intel Community)
After 2010
What’s Ending?
What’s Ending?
Investment tax cuts extended until December 31, 2010 (previously 12/31/2008)
2003 Investment Tax Cuts
Applies to long term (>1 year) capital gains and qualified dividends
Capital gains for taxpayers in 10% to 15% bracket dropped to 0% in 2008 to 2010
Max LT capital gain rate will return to 20% and max qualified dividend rate will return to 39.6% in 2011
Unrecaptured Section 1250 gains taxed at max 25% $3000 loss write-off against ordinary income still in effect
10% - 15% 25% +General capital assets (stock, land, etc.) 0% 15%
Section 1250 property1 10% - 15% 25%Collectibles 10% - 15% 28%
1 Gain attributab le to building depreciation
Taxpayer's Ordinary Rate
Capital Gain Tax Rates
What’s Beginning?
Income limit eliminated for Roth IRA Conversions in 2010
ROTH IRA Conversions
Taxpayers with modified AGI > $100,000 will be able to convert Traditional IRA funds to a Roth IRA in 2010
If convert in 2010, you can spread the federal income tax over 2 years (2011 & 2012)
What’s Beginning?
Questions?
Christine Elsea Mandojana, CPAFinancial Planning & Tax Services
Financial Planning
Comprehensive Planning Budget/Cash Management Debt Management Retirement Planning Education Planning Insurance Planning
Tax Services
Tax Planning Tax Preparation
(Federal and State)
Service Offerings
christine@cemtaxplanning.comBogota Office: 296-1470
Cell: 321-205-2810US VOIP: 202-657-4875US Fax: 301-576-4415