The standard mileage rate is generally available to self-employed individuals or employees for business use and individuals for charitable, medical, or job-related moving use of an automobile.  Certain uses preclude the use of the standard mileage rate which include vehicles used for hire, businesses that use five or more automobiles simultaneously, and vehicles previously depreciated (except when using the straight-line method over the useful life).

For 2009 the standard mileage rates are:

In addition to the standard mileage rate taxpayers may also deduct business related parking and tolls and the business-use percentage of personal property taxes and interest; however, employees must treat all taxes and interest as personal.

The taxpayer's basis in the automobile is reduced by the depreciation component of the standard mileage rate.  The rate differs from year to year as follows.

 Last updated: October 29, 2009

For 2009 only, taxpayers who purchase a new car, light truck, motor home or motorcycle might receive a deduction for the state and local sales and excise taxes paid on the purchase.  In order to qualify the vehicle must be purchased after February 16, 2009 and before January 1, 2010 and the deduction is limited to the sales and excise taxes and similar fees paid on a maximum sales price of $49,500.

The deduction will increase a taxpayer's standard deduction or can be claimed as an itemized deduction if the taxpayer is not electing to take the state and local general sales tax deduction.

This deduction starts to phase out at $250,000 and $125,000 of modified adjusted gross income for joint filers and other taxpayers, respectively.

Last updated: October 30, 2009

Due to the current economic conditions that are affecting all of us a special provision has been announced relating to the required minimum distribution (RMD) from retirement accounts.  Generally taxpayers over 70 1/2 years old must take a distribution from their retirement accounts each year based upon tables published by the Internal Revenue Service (I.R.S.).  For 2009 this requirement has been waived.

If you have already taken your RMD for 2009 then you have 60 days or until November 30, 2009 to roll the money back into a retirement account.  You can in effect retroactively reduce your tax bill if you can do without the money.

Taxpayers not only have the opportunity to avoid tax on the RMD but to reduce their income so that Social Security Benefits are potentially not taxable this year. 

Last updated: October 30, 2009

For 2009 and 2010 a new refundable credit is available to people with earned income.  The credit is equal to the lesser of 6.2% of an individual's earned income or $400 ($800 on a joint return).  The amount is phased out beginning at $150,000 and $75,000 of modified adjusted gross income for joint filers and all other taxpayers, respectively.

Wage earners should have already received the benefit from this credit through reduced federal income tax withholding from their paychecks.  All other qualifying taxpayers will see the benefit on their individual income tax returns.

This credit is reduced by the $250 economic recovery payment received by retirees, disabled individuals, supplemental security income recipients, and disabled veterans.

See our article concerning how this credit could impact your refund or balance due.  Click here.

Last updated: October 30, 2009

For 2009 and 2010 the American Opportunity Tax Credit expands the tax breaks under the Hope credit to include 100% of the first $2,000 and 25% of the next $2,000 of tuition and related expenses (including books¹).  The credit is now available for the first four years of a post-secondary education in a degree or certificate program instead of the first two years.  Also new this year is that 40% of the credit is refundable, so even if you do not owe tax you can get up to $1,000 of this credit refunded.  Phase-out of the credit begins at $160,000 and $80,000 of adjusted gross income  for joint filers and other taxpayers, respectively.

¹New this year!  Books, supplies, and equipment needed for a course of study - whether or not required as a condition of enrollment or attendance - can be used to compute the Hope credit!

Last updated: Ocotber 30, 2009

The First Time Home buyer Tax Credit, set to expire on November 30, 2009, has been extended for principal residences purchased before May 1, 2010 (July 1, 2010 in certain circumstances).  Generally, the credit is equal to the lesser of $8,000 ($4,000 if married filing separately) or 10% of the purchase price.

Expanded to cover existing home owners
The extension also makes some existing homeowners eligible for a maximum credit of $6,500 ($3,250 if married filing separately). Home buyers who have maintained the same principal residence for any five-consecutive year period during the last eight years ending on the date of purchase generally qualify.

Selected limitations
The extended credit raises the phase-out income levels.  Upon the effective date joint taxpayers with $225,000 ($125,000 single) of modified adjusted gross income (MAGI) may qualify for the full credit.  Taxpayers filing jointly with MAGI up to $245,000 ($145,000 single) may qualify for a partial credit. Also new in the extended legislation is a limit on the purchase price of the principal residence.  For purchases after the enactment date if the purchase price exceeds $800,000 then the credit cannot be claimed.

Service members may also benefit by an extended purchase period and a waiver of recapture provisions.

This bill was enacted on November 6, 2009.

We would be happy to schedule an appointment with you to discuss how this credit may impact you.

Last updated November 23, 2009

According to a report issued by the Treasury Inspector General for Tax Administration millions of taxpayers may be underwithheld due to the revised withholding tables published by the Internal Revenue Service (IRS) last May.

The Making Work Pay Credit is a refundable credit equal to 6.2% of a taxpayers modified earned income or $400 ($800 on a joint return), whichever is less.  In order to accelerate the effect of the credit it was implemented immediately through reduced federal withholdings in employees' checks.  The problem occurs mainly for taxpayers who fall into one of the following categories.

• Dependents who work.  If you are claimed as a dependent by another taxpayer you cannot claim the credit, but your withholding was reduced by $400.  If your 2008 refund was less than $400 then it is likely you will owe on your 2009 return.
• Single taxpayers who work more than one job.  The withholding tables give you a $400 reduction for each job you work, but you will only be entitled to one credit on your return. Your refund will be reduced or you will owe the difference.
• Joint filers where the husband and wife work more than one job collectively.  The tables will allow a reduction that is greater than the maximum $800 credit allowed.  The difference, $400 in many cases, will reduce your refund and/or increase the amount you owe.
• Taxpayers who receive pension payments.  The pension withholding tables were modified to allow for the credit, but pension payments are not earned income and do not qualify for the credit.  Taxpayers will have to repay any reduction in pension withholding either by reduced refunds or writing a check to the IRS.
• Social Security recipients who also receive wages.  If you receive Social Security you received a $250 check during 2009, if you also have a job you received a $400 credit through reduced withholding, and if you receive a pension you got the benefit of another $400 reduction for a total of $1,050.  The maximum credit is $400 per individual so you will have to repay the $650 in excess credits received during the year.

To avoid these possibilities taxpayers should adjust their withholdings so that more money is withheld for the remainder of the year.

Last updated: November 23, 2009

After a brief absence in 2008 the nonbusiness energy credit returns for 2009 and 2010.

The nonbusiness credit applies to energy efficient improvements to a dwelling unit in the United States that is used by a taxpayer as his or her principal residence.  Energy efficient improvements included building envelope components that meet certain requirements and energy property expenditures including certain circulating fans, furnaces or hot water boilers, heat pumps, water heaters, and central air conditioners.

Under current law the credit is extended in several ways.

• The amount of the credit is extended from 10% to 30%;
• expenditures for energy property that were limited to maximum credits of $50, $150 or $300 are now eligible for a 30% credit; and
• the $500 lifetime maximum has been increased to an aggregate amount of $1,500 for 2009 and 2010.

The current credit now expires at the end of 2010.

Last updated: December 1, 2009

Under previous law there was a lifetime maximum credit of $500 of which only $200 could be used toward window expenditures.

• Consider bunching your itemized deductions together in this year or delay payment until next year for maximum benefit.
   
• Trustees should consider making distributions within 65 days after year end to have the income taxed at the beneficiary’s rates instead of the higher trust rates.
   
• The Social Security wage base remains unchanged at $106,500 for 2009 and 2010.
   
• The annual gift tax exclusion is $13,000 for 2009 and 2010.
   
• The unified credit amount is $1,000,000 for gift tax purposes for 2009 and 2010 and $3,500,000 for estate tax purposes for 2009.  The estate tax is scheduled to be repealed for 2010 only.

The topics discussed on this website are subject to a number of limitations and restrictions and may change without notice. Contact our office to schedule an appointment so we can discuss your unique tax situation and if these topics or others can benefit you.

In compliance with IRS Circular 230:
Any statements or tax advice that are contained on this website are not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer.