Entries categorized as ‘Tax Planning & Information’
It’s the time of year that people and businesses are focusing on filing their 2009 tax returns. However, it’s never too late to get organized and plan for the future! Studies show that individuals who plan for the future and remain organized save more money, not only as a function of their personal savings efforts, but also in the form of reduced expenses related to income tax preparation and other financial planning services.
By law, each year, the dollar amounts for a variety of tax provisions must be revised to match inflation. As we all know that inflation was minimal in 2009 as compared to prior years, there are no significant changes in the specific provisions for 2010 as compared to 2009. Following are some of the key items affecting 2010 tax returns (and which are due to be filed by April 15, 2011 for most people):
- The personal and dependency exemption will remain the same as 2009 levels, at $3,650 per individual or dependent.
- The standard deduction for married couples filing jointly, married individuals filing separately and singles remain the same as 2009 levels. Specifically, the standard deduction for each is listed below:
Married couples filing jointly – $11,400
Married individual filing separately – $5,700
Singles – $5,700
- The federal tax rate thresholds for 2010 are increased slightly from 2009 levels. That means that individuals will need to earn slightly more money before their tax rate increases from 15% to 25%.
- The maximum earned income credit for working families with 2 or more children for 2010 is $5,028, up from $4,824 for 2009. Further, the upper income limit to qualify for the credit for joint filers with 2 or more children is $43,415 for 2010, up from $41,646 for 2009.
- The annual gift exclusion will remain consistent with 2009 at $13,000 per individual.
The above information is a summary of some of the key items that will affect taxpayers in 2010, and are subject to changes by the IRS. As such, it is important to consult with a qualified tax professional when dealing with tax issues as the rules are complex and include numerous qualifiers and phase outs.
Categories: Tax Planning & Information
Tagged: earned income credit, gift exclusion, standard tax deduction, tax thresholds
Late in 2009, Congress passed The Worker, Homeownership and Business Assistance Act of 2009, which extended the First-Time Homebuyer Credit and expanded the credit to apply to more individuals.
Following are some of the key items that individuals should know with respect to the credit:
- To qualify, you must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010. This means that second homes and vacation homes do NOT qualify.
- If you enter into a binding contract by April 30, 2010, you must close escrow on the purchase of the home before June 30, 2010 (this may prove difficult for short-sale and bank-owned properties).
- For purchases (see above) made in 2010, you have the option of claiming the credit on your either your 2009 or 2010 tax return. This is great as it allows you to receive the benefit of the credit almost concurrent with the purchase.
- A reduced credit is now available for residents who have lived in the same principal residence for any five consecutive year period during the preceding eight year period that ended on the date the new home is purchased. Additionally, to qualify under this provision, the settlement date for the new purchase must be after November 6, 2009.
- The maximum credit for long-time residents (see #4 above) is $6,500 for married couples filing jointly. For married couples filing separately, the maximum credit for long-time residents is $3,250 each.
- People with higher incomes can now qualify for the credit. The new law raises the upper income limits for homes purchased after Nov. 6, 2009. In order to receive the full credit, taxpayers must have adjusted gross incomes of $125,000, or $225,000 for joint filers.
- To claim the credit on homes purchased after Nov. 6, 2009, and all home purchases claimed on 2009 tax returns, the newly revised IRS Form 5405 must be used. This form was revised in December 2009. Failure to use the proper form may cause the credit to be denied.
- No credit is available if the purchase price of the home exceeds $800,000.
- The purchaser must be at least 18 years of age on the date of the purchase.
- A dependent of another taxpayer is not eligible to claim the credit, even if over 18 years of age.
As a caution, the IRS has stated that there was much abuse of this credit during 2009 and as a result it plans to be critical of credits claimed on future tax returns. To protect yourself and obtain the maximum credit for which you may qualify, it is important to consult with a qualified tax professional regarding the credit.
Categories: Tax Planning & Information
Tagged: tax credit
Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.
The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.
1. Who is eligible to claim the tax credit?
2. What is the definition of a first-time home buyer? How is the amount of the tax credit determined?
3. Are there any income limits for claiming the tax credit? What is “modified adjusted gross income”?
4. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
5. Can you give me an example of how the partial tax credit is determined?
Read the rest of the article at this link and get answers to your questions.
Categories: Tax Planning & Information
Tagged: 1st time home buyer, housing, tax credit
