Individual Income Tax Considerations
• Non-business Energy Property Credit: This credit equals 30 percent of what a homeowner spends on eligible energy-saving improvements, up to a maximum tax credit of $1,500 for the combined 2009 and 2010 tax years. This means that a homeowner can get the maximum credit by spending at least $5,000 on qualifying improvements. Homeowners must make the improvements to an existing principal residence; this tax credit is not available for new construction. Due to limits based on tax liability, other credits claimed by a particular taxpayer and other factors, actual tax savings will vary. The cost of certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass all qualify, along with labor costs for installing these items. In addition, the cost of energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs are also eligible for the credit, though the cost of installing these items does not count.
• Stock and Bond Sales –Consider selling stocks with losses before the end of the year to reduce any other gains you may have, including capital gain dividends. Only $3,000 of net losses from security transactions can be deducted in the current year. The balance of any loss will carry over to the following year. Additionally, you may want to consider holding stock with a gain until January to defer the tax liability.
• First Time Homebuyer Tax Credit- First time home buyers purchasing any kind of home—new or resale—are eligible for up to a $8,00 tax credit. Additionally, a long-time resident of the same home can now qualify for a $6,500 credit. To qualify, the purchase must close prior to June 30, 2010.
• Deductible Expenses – Charge deductible expenditures on credit cards to get a current deduction even if payment of the charge will not be made until next year, including fourth quarter state estimated tax payments and charitable donations.
• Charitable Donations – Make charitable donations with appreciated stock owned more than one year. The fair market value is used to measure the donation, and there is no tax on the difference between your cost and the fair market value.
• Medical Expenses – Medical expenses are deductible only if they exceed 7.5% of your adjusted gross income. You may want to reschedule and pay for procedures this year to get the benefit of a 2008 medical deduction – or reschedule to next year for a 2009 deduction. Includible as medical expenses are transportation, medical insurance premiums, certain long-term care premiums, prescription drugs and certain medically prescribed programs such as weight-loss.
• Tax Credits Increased for Low and Moderate Income Workers - More workers and working families are eligible for the Earned Income Tax Credit. In particular, expanded benefits are now available for those with three or more qualifying children and married couples. The EITC helps taxpayers whose incomes are below certain income thresholds, which in 2009 rise to:
• $48,279 for families with three or more qualifying children
• $45,295 for those with two or more children
• $40,463 for people with one child
• $18,440 for those with no children
One in six taxpayers can claim the EITC, which, unlike most tax breaks, is refundable, meaning that individuals can get it even if they owe no tax and even if no tax is withheld from their paychecks. In addition, the earned income formula for the additional child tax credit is revised for tax years 2009 and 2010. As a result, more low and moderate income families qualify for the full $1,000 child tax credit. See Form 8812 for more information.
Forms:
IRS Forms and Instructions
• $48,279 for families with three or more qualifying children
• $45,295 for those with two or more children
• $40,463 for people with one child
• $18,440 for those with no children
One in six taxpayers can claim the EITC, which, unlike most tax breaks, is refundable, meaning that individuals can get it even if they owe no tax and even if no tax is withheld from their paychecks. In addition, the earned income formula for the additional child tax credit is revised for tax years 2009 and 2010. As a result, more low and moderate income families qualify for the full $1,000 child tax credit. See Form 8812 for more information.