NEWSLETTER
What's
New for 2009
Personal Exemptions
For 2009 the Personal Exemption is $3,650
Standard
Deduction
Single $5,700
Joint 11,400
Head of Household 8,350
Blind and 65 + Joint $1,100
2009 Section 179 Deduction
Section 179 Deduction for is $250,000.
2009 Standard Mileage Rate
January 1st to December 31st is 55cents per mile for business
24cents for medical purposes and 14cents per mile for
charitable purposes.
2009 Cash for clunkers
A
$3,500 or $4,500 voucher or payment made for such a voucher under the CARS
"cash for clunker's" program to buy or lease a new fuel-efficient
automobile is not taxable for federal income tax purposes.
New for 2009 Sales and Excise tax Deduction
Effective for purchases on or after February 17, 2009 and before January 1,2010, taxpayers may increase their standard deduction by state and local sales and excise taxes imposed on the purchase of qualified motor vehicle.The deduction is added to the standard deduction for taxpayers that do not itemize.
Unemployment
compensation
Alternative
Mimimum Tax (AMT)exemption amount increased
A noncustodial parent claiming an exemption for a child can no longer attach certain pages from a divorce decree or separation agreement instead of Form 8332 if the decree or agreement went into effect after 2008. The non custodial parent must attach Form 8332 or a similiar statement signed by the custodial parent and whose only purpose is to release a claim to exemption.
Roth IRA Income Limit.
You may be able to make a Roth IRA contribution if your modified AGI is less than $120,000 ($176,000, if you are married filing jointly or a qualifying widow(er).
Generally, gain from sale of your main home is no longer excludable from income if it is allocable to periods after 2008 when neither you nor your spouse used the property as a main home.
Social Security and Medicare taxes.
The maximum wages subject to soical security tax (6.2%) increased to $106,800. All wages are subject to Medicare tax (1.45%).
Required
Minimum Distributions Suspended For 2009
The new law passed late in 2008 allows taxpayers age 70 1/2 and over and those who have inherited IRAs (beneficiaries) to forgo their required minimum distribution (RMD) for 2009. Thus these individuals can take
a distribution less than is required, even none , and avoid the 50% RMD penalty.
Keep in mind that this is for year 2009 only. So if the taxpayer turned 70 1/2 in 2008 and delayed the first distribution to 2009, as permitted in the first RMD Year they will still be required to make that delayed
distribution in 2009 and no later than April, 2009.
Tax
Deduction for Tuition and Fees
The
above-the-line deduction for higher education expenses increased in 2004 based
on the 2001 Tax Act. The maximum
deduction increases to $4,000 for 2008 and 2009. In addition, some taxpayers
who were not eligible for the deduction based on their adjusted gross income
are now eligible for a maximum $2,000 deduction.
IRA
Contributions
For 2009 the income eligibility limits for a deductible IRA contribution
increases to $55,000 for single taxpayers and $89,000 for a married couple
filing jointly.
The
maximum IRA contribution for 2009 is $5,000 and an additional $1000 for taxpayers
who are 50 years of age or older in 2009. Note that the contribution limits
in 2009 will be $5,000 and an increase in the additional catching-up to $1,000.
Roth
IRAs continue to be an attractive investment option. The generous AGI test
($105,000 - $120,000 for singles and $166,000 - $176,000 for married couples)
makes this form of retirement savings available to many taxpayers. Unlike
the traditional deductible IRA, the Roth IRA does not provide a current tax
deduction but does provide future tax-free growth. Two other benefits to the
Roth IRA are 1) there are no minimum mandatory distribution rules and 2) you
can contribute to a Roth as long as you are working – no age limits.
The
amount of money that eligible taxpayers may contribute to a Roth IRA in 2009
is the lesser of $5,000 or 100% of compensation.
Plan
now for 2010 Roth Conversions
Beginning in 2010, under the previously enacted legislation , the income and marital status restrictions that limit
the ability of a taxpayer to convert a traditional IRA to a Roth IRA have been removed, leading to some
interesting and very advantageous tax and estate planning strategies.
Under prior law, an individual was allowed to convert a traditional IRA to a Roth IRA if the taxpayers AGI
for the year was $100,000 or less.
Beginning in 2010 the new legislation
1. Eliminates the $100,000 modified AGI limit on conversions of tradfitional IRAs to Roth IRAs and
2. Permits married taxpayers filing a separate tax return to convert amounts in a traditional IRA into a Roth IRA . Under prior law , married taxpayers who filed separate tax returns were restricted from making conversions.
Recordkeeping
for Cash donations
Prior to this law change , for cash contributions less than $250 taxpayers were only required to have a
contemporaneous
record of the contributions.
Sales
Tax Deduction
The tax break allowing individuals taxpayers to choose between deducting state income tax or sales tax whichever provides them the best benefit is retroactively restored for 2008 and extended to 2009.
Limit
on Itemized Deduction
Some
of your itemized deductions may be limited if your adjusted gross income is
more than $166,800 (83,400 if you are married filing separately).
