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Tax breaks for 2009

Rebecca Berfanger
January 6, 2010
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Indiana Lawyer Focus


While taxes aren't due until April 15, it's never too early to consider what to discuss with a tax professional or what might be worth a little research before filing for 2009.

Those who bought new homes, new cars, office equipment, and/or have children may benefit from some of these credits if they have a qualifying income and meet other requirements.

First-time homeowners

For anyone who has bought a new home in 2009, they were likely already aware of the $8,000 tax credit, according to Kevin Sullivan of Katz Sapper & Miller, an Indianapolis accounting firm. Sullivan is an accountant and an attorney.

Some of the important aspects of this credit, he said, include that in early November 2009 it was expanded to include those who buy their first home after the original deadline of Nov. 30, 2009, to April 30, 2010.

According to IRS.gov, another change is a new credit for "long-time residents" of up to $6,500.

"To qualify this way, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eightyear period ending on the date of purchase of a new home as a primary residence," according to IRS.gov.

Sullivan suggested individuals bring certain materials, such as closing documents, to meetings with their tax professionals when discussing whether they qualify for either of these credits.

And while the $8,000 credit requires the homeowner have the home as a principal residence for at least three years, he said it was worth considering whether this would be an issue for the homeowner if he or she might be moving in the next three years.

There are also other conditions, including income. For those who purchased after Nov. 6, 2009, homeowners can make a modified adjusted gross income up to $125,000 for single filers, or up to $225,000 for joint filers. A reduced credit is available to those with MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers.

The previous MAGI limits apply to those who bought a new home before Nov. 6, 2009: "the full credit is available to taxpayers with MAGI up to $75,000, or $150,000 for joint filers. Those with MAGI between $75,000 and $95,000, or $150,000 and $170,000 for joint filers, are eligible for a reduced credit," according to IRS.gov.

The value of the home also determines the credit - it is 10 percent of the purchase price of the home up to $8,000 for those with the lower incomes, so if someone were to buy a house for $50,000, they would only get $5,000 of the potential $8,000 they might otherwise qualify for. No credit is available if the purchase price of the home is more than $800,000.

New car owners

Another large purchase that may result in a tax break is a new car.

Tax attorney Gregory J. Cagnassola, of DeFur Voran in Fishers, said anyone who bought a new car in 2009 who meets the income restrictions can deduct state and local sales and excise taxes.

Individuals qualify if they make up to $125,000, and then the credit is phased out for those who make up to $135,000 as individual filers. The income limit is $250,000 for joint filers, and is phased out for those who make up to $260,000 as joint filers.

He suggested that individuals bring their receipts when meeting with tax professionals. This credit applies to individuals who bought cars between Feb. 16, 2009, and Jan. 1, 2010, according to IRS.gov.

Parents

Individuals with children may also be able to receive more money this year.

The refundable portion of the child tax credit was increased for 2009 and 2010, and parents of children who are in college also have a couple incentives to address the cost of education, Cagnassola said.

For parents who claim college-age children as dependents, he suggested looking into whether the Hope Education Credit, now known as the American Opportunity Credit, would now apply because income levels have increased, and the credit was also extended to include four years of post-secondary education, as opposed to the previous two-year limit. The maximum amount, depending on expenses and income, is $2,500.

"Along the same lines for education, qualifying beneficiaries of 529 Plans can use tax redistribution to help pay for computers," he said. "Everyone needs a laptop in college, and this is a way to take a little bit of a bite out of the cost."

Small firms

For solo practitioners and attorneys with home offices, there are a few tax breaks worth looking into, Cagnassola and Sullivan said.

For instance, how one can consider if they can claim the depreciation of new equipment has changed, and Cagnassola added the IRS has become more accepting of home office claims in recent years.

While neither tax professional had a reason for an individual to not claim a credit, Cagnassola said he used to caution clients when claiming tax credits on home offices because they'd be more likely to be audited. Now that doesn't happen as often as it used to.

Both tax professionals also highly encouraged anyone to seek help from a tax professional, but recommended looking for 2009 tax information on the IRS' Web site, www.irs.gov. Sullivan also recommended www.CCH.com, the Web site of Commerce Clearing House, which he said is often referred to by tax attorneys and accountants when they want more information.

Depending on how one feels about who is eligible for tax credits, Sullivan said, "It's Congress' way of trying to target the deduction to who they have in their minds as people who can benefit from the credit and ... how the economy will benefit from a particular class of tax payers. The limitations and phase outs are determined by Congress to achieve those objectives. Whether it'll be effective or not, we'll leave it to them to figure that out."

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