Deferring Taxes
You’ve heard a lot about Stimulus bills throughout the year. Many of the tax breaks of the recent stimulus bills will expire at the end of 2009, and there are no guarantees they will still be available in 2010. So, consider some of the following:
- Income Shifting: Currently the top two tax rates are 33% and 35%, but they expire after December 31, 2010. Current proposals reinstate the 36 % and 39.6% rates in 2010. The potential exists that Congress can make these moves retroactive to January 1, 2010. So, if you are higher income individual, you need to look at ways to accelerate income into the current year to protect your risk.
- Gains and Losses: Look at year end trades (tax harvesting) as a method to manage your liability from any gain.
- First Time Homebuyer Credit: The Worker, Homeownership, and Business Assistance Act of 2009 extends the deadline for qualifying home purchases from Nov. 30, 2009, to April 30, 2010. Additionally, if a buyer enters into a binding contract by April 30, 2010, the buyer has until June 30, 2010, to settle on the purchase.The maximum credit amount remains at $8,000 for a first-time homebuyer –– that is, a buyer who has not owned a primary residence during the three years up to the date of purchase.
But the new law also provides a “long-time resident” credit of up to $6,500 to others who do not qualify as “first-time homebuyers.” 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 eight-year period ending on the date of purchase of a new home as a primary residence.
For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax returns.
A new version of Form 5405, First-Time Homebuyer Credit, will be available in the next few weeks. A taxpayer who purchases a home after Nov. 6 must use this new version of the form to claim the credit. Likewise, taxpayers claiming the credit on their 2009 returns, no matter when the house was purchased, must also use the new version of Form 5405. Taxpayers who claim the credit on their 2009 tax return will not be able to file electronically but instead will need to file a paper return. - Green Incentives: We have talked about these throughout the year. Make your improvements up to 30% of the sum of the improvements, limited to $1500 for 2009 and 2010. Make sure the improvement is qualified and has the appropriate documentation. Look also at the New Residential Energy Property Credit.
- Contributions: Tighter rules- now a bank
