LivingstonCPA - Recent Tax Updates - Jacksonville, Florida

LivingstonCPA - Individual and Small Business Taxation - Small Business Accounting

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Recent Tax Updates

Here a few recent tax updates. If you have specific questions or would just like to talk with a CPA please feel free to contact us.

American Recovery and Reinvestment Act of 2009

The $800 billion American Recovery and Reinvestment Act of 2009, enacted February 17, 2009, included new tax breaks and made changes to existing ones. Some noteworthy items from 08/09 legislation that impact the 2009 tax year are as follows:

Non-Itemizer Real Estate Tax Deduction

Taxpayers claiming the standard deduction can claim an additional deduction for real estate taxes paid - the lesser of real estate taxes paid or $500 ($1,000 for joint filers).

Making Work Pay Credit*

Provides eligible individuals a refundable credit for '09 and '10 equal to the lesser of: (1) 6.2 percent of an individual's earned income or $400 ($800 for joint filers).

*Only individuals with earned income qualify for the Making Work Pay credit. Subject to income limits.

Enhanced first-time homebuyer credit

The Act extends the credit, increases the maximum amount to $8,000 ($4,000 for MFS), and waives credit recapture for qualifying purchases** made from 1/1/09 to 11/30/09.

**Purchase happens at title closing NOT at contract execution.

One-year AMT patch

Provides increased AMT exemption amounts and allows nonrefundable personal credits to offset both regular and AMT tax liability. Expected to insulate almost 26 million taxpayers from AMT.

Additional energy incentives

Noteworthy changes include:

10% credit rate previously in effect raised to 30%
property otherwise eligible for $50, $100, or $150 credit is instead eligible for 30% credit
provision is extended through 12/31/2010
$500 lifetime cap (and $200 lifetime cap for windows) is eliminated and replaced with an aggregate cap of $1,500 in the case of property placed in service during '09 and '10.

Education-related benefits

Hope credit modified and renamed the "American Opportunity Tax" credit for '09 and '10. Allowable modified credit is up to $2,500 per eligible student per year for qualified tuition and related expenses*.

*Definition is expanded to include course materials as well as computer equipment used by student.
Tuition deduction is extended through 2009. This is the above-the-line deduction for qualified higher education expenses paid by the taxpayer during a taxable year. Qualified higher education expenses are defined in the same manner as for purposes of the HOPE credit.

Improved child tax credit

The '09 Act further enhances the refundable tax credit by lowering even further the income threshold within the earned income formula used to calculate the credit. Applies to '09 and '10.

Earned Income Tax credit

Temporarily increases the EITC credit percentage for families with three or more qualifying children to 45 percent for 2009 and 2010.

Also extended:

Sales tax itemized deduction and charitable distribution from IRA

This list is not meant to be inclusive of all recent tax legislation. For more information visit the IRS' website for Highlights of Recent Tax Changes.