Higgins & Associates, CPA Inc.

News:

Deduction for Sales and Excise Taxes Imposed on Purchase of New Motor Vehicles

In 2009, you can deduct the state or local sales and excise taxes imposed on the purchase of a qualified motor vehicle after February 16, 2009, and before January 1, 2010. A qualified motor vehicle includes a passenger automobile, light truck, or motorcycle, the original use of which begins with that purchaser and that has a gross vehicle weight rating of 8,500 pounds or less. A qualified motor vehicle also includes a motor home, the original use of which begins with that purchaser. The amount of tax you are able to deduct is limited to the tax that is imposed on the first $49,500 of the purchase price of the vehicle. The deduction is phased out over a $10,000 range that begins when modified adjusted gross income is more than $125,000 ($250,000 if married filing a joint return). No deduction is allowed when modified adjusted gross income is equal to or more than $135,000 ($260,000 if married filing a joint return). The new deduction can be used to increase the amount of your standard deduction or you can take it as an itemized deduction (if you are not electing to take the state and local general sales tax deduction).

Page Last Reviewed or Updated: May 14, 2009
Source: http://www.irs.gov/formspubs/article/0,,id=208101,00.html 

Education-Related Tax Changes

Health/Medical-Related Tax Changes

Maximum Tax Rate on Qualified Dividends and Net Capital Gain Reduced

For tax years beginning after 2007, the 5% maximum tax rate on qualified dividends and net capital gain (the excess of net long-term capital gain over net short-term capital loss) is reduced to 0%. The 15% maximum tax rate on qualified dividends and net capital gain has not changed.

Page Last Reviewed or Updated: March 07, 2009
Source:   http://www.irs.gov/formspubs/article/0,,id=179793,00.html

Residential Energy Credits

2008

Nonbusiness energy property credit expired.You cannot claim the nonbusiness energy property credit for property placed in service in 2008.

Residential energy efficient property credit expanded. You can now include costs for qualified small wind energy property and geothermal heat pump property in figuring the residential energy efficient property credit.

2009

Nonbusiness energy property credit. This credit, which expired after 2007, has been reinstated. You may be able to claim a nonbusiness energy property credit of 30% of the cost of certain energy-efficient property or improvements you placed in service in 2009. This property can include high-efficiency heat pumps, air conditioners, and water heaters. It also may include energy-efficient windows, doors, insulation materials, and certain roofs. The credit has been expanded to include certain asphalt roofs and stoves that burn biomass fuel.

Limitation. The total amount of credit you can claim in 2009 and 2010 is limited to $1,500.

Residential energy efficient property credit. Beginning in 2009, there is no limitation on the credit amount for qualified solar electric property costs, qualified solar water heating property costs, qualified small wind energy property costs, and qualified geothermal heat pump property costs. The limitation on the credit amount for qualified fuel cell property costs remains the same.

 Page Last Reviewed or Updated: April 29, 2009 
 Source: http://www.irs.gov/formspubs/article/0,,id=207332,00.html


Unemployment Compensation

For any tax year beginning in 2009, each recipient of unemployment compensation can exclude from gross income up to $2,400 of the amount he or she received during the year.

Page Last Reviewed or Updated: July 09, 2009
Source: http://www.irs.gov/formspubs/article/0,,id=207577,00.html


Wage Threshold for Household Employees

2009 Changes

The social security and Medicare wage threshold for household employees is $1,700 for 2009. This means that if you pay a household employee cash wages of less than $1,700 in 2009, you do not have to report and pay social security and Medicare taxes on that employee's 2009 wages. For more information, see Social security and Medicare wages in Publication 926, Household Employer's Tax Guide.

Page Last Reviewed or Updated: July 09, 2009
Source: http://www.irs.gov/formspubs/article/0,,id=181051,00.html

Discharge of Qualified Principal Residence Indebtedness
The Emergency Economic Stabilization Act of 2008 extended the exclusion from gross income for the discharge of qualified principal residence indebtedness by an additional 3 years. The exclusion now applies to debt discharged after 2006 and before 2013. See Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), and Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals), for more information.

Page Last Reviewed or Updated: July 09, 2009
Source: http://www.irs.gov/formspubs/article/0,,id=210619,00.html


Exclusion on Sale of Main Home by Surviving Spouse

For sales after 2007, the maximum exclusion on the sale of a main home by an unmarried surviving spouse is $500,000 if the sale occurs no later than 2 years after the date of the other spouse's death. However, this rule applies only if the requirements for joint filers relating to ownership and use were met immediately before the date of such death, and during the 2-year period ending on the date of such death, there was no sale or exchange of a main home by either spouse which qualified for the exclusion.

Page Last Reviewed or Updated: March 07, 2009
Source: http://www.irs.gov/formspubs/article/0,,id=181048,00.html


First-Time Homebuyer Credit

If you are a first-time homebuyer, you may be able to claim a one-time tax credit equal to the lesser of:

$7,500 ($8,000 if you purchased your home in 2009), but only half of that amount if married filing separately, or
10% of the purchase price of your home.

You may be able to claim the credit if:

You purchased your main home in the United States after April 8, 2008, and before December 1, 2009, and
You (and your spouse if married) did not own any other main home during the 3-year period ending on the date of purchase.

If you constructed your main home, you are treated as having purchased it on the date you first occupied it.

Who cannot claim the credit. You cannot claim the credit if any of the following apply. 

Your modified adjusted gross income is $95,000 or more ($170,000 or more if married filing jointly).
You are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. See Form 8859. This rule does not apply for a home purchased in 2009.
Your home financing comes from tax-exempt mortgage revenue bonds. This rule does not apply for a home purchased in 2009.
You are a nonresident alien
Your home is located outside the United States
You sell the home, or it ceases to be your main home, before the end of 2008
You acquired your home by gift or inheritance
You acquired your home from a related person. A related person includes:
Your spouse, ancestors (parents, grandparents, etc.), or lineal descendants (children, grandchildren, etc.)
A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock of the corporation
A partnership in which you directly or indirectly own more than 50% of the capital interest or profits interests

Repayment of credit

Homes purchased in 2008. You generally must repay the credit over a 15-year period in 15 equal installments. The repayment period begins in 2010 and you must include the first installment as additional tax on your 2010 tax return.
If your home ceases to be your main home before the 15-year period is up, you must include all remaining annual installments as additional tax on the return for the tax year that happens. This includes situations where you sell the home, you convert it to business or rental property, or the home is destroyed, condemned, or disposed of under threat of condemnation.


Homes purchased in 2009. You must repay the credit only if the home ceases to be your main home within the 36-month period beginning on the purchase date. This includes situations where you sell the home, you convert it to business or rental property, or the home is destroyed, condemned, or disposed of under threat of condemnation. You repay the credit by including it as additional tax on the return for the year the home ceases to be your main home. If the home continues to be your main home for at least 36 months beginning on the purchase date, you do not have to repay any of the credit.

Page Last Reviewed or Updated: April 29, 2009
Source: http://www.irs.gov/formspubs/article/0,,id=203083,00.html


Sale of Main Home

Gain from the sale or exchange of the main home is no longer excludable from income if allocable to periods of nonqualified use.

Generally, nonqualified use means any period after 2008 where neither you nor your spouse (or your former spouse) used the property as a main home (with certain exceptions).

A period of nonqualified use does not include:

1.  Any portion of the 5-year period ending on the date of the sale or exchange that is after the last date you (or your spouse) use the property as a main home;
2.  Any period (not to exceed an aggregate period of 10 years) during which you or your spouse is serving on qualified official extended duty:

    As a member of the uniformed services,
    As a member of the Foreign Service of the United States, or
    As an employee of the intelligence community; and
    Any other period of temporary absence (not to exceed an aggregate period of 2 years) due to change of employment, health conditions, or such other unforeseen circumstances as may be specified by the IRS.

To figure the portion of the gain that is allocated to the period of nonqualified use, multiply the gain by the following fraction:

total nonqualified use during period of ownership after 2008
total period of ownership

Page Last Reviewed or Updated: July 09, 2009
Source: http://www.irs.gov/formspubs/article/0,,id=210620,00.html