Pusateri, Nichols & Co. CPAs
 
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Current and Future Tax Item Updates

 

Hire Act

Under the Hiring Incentives to Restore Employment (HIRE) Act, enacted March 18, 2010, two new tax benefits are available to employers who hire certain previously unemployed workers (“qualified employees”).

1)    Payroll tax exemption provides employers with an exemption on Social Security tax on wages paid to qualifying employees.

2)    Business Credit for Retention of Certain Newly Hired Individuals in 2010.

For more information, please visit:

http://www.irs.gov/businesses/small/article/0,,id=220745,00.html

 

The Patient Protection and Affordable Care Act

There are a number of tax provisions in this act.  Some are in effect now and some will be implemented during the next several years. 

For current provisions, please visit:

http://www.irs.gov/newsroom/article/0,,id=220809,00.html

For a list current and future provisions, please visit:

http://www.journalofaccountancy.com/Web/20102724.htm

 

 

American Recovery and Reinvestment Act of 2009

This is a list of the highlights from the new “stimulus bill.”  Some of these items are touched below.

 

Improved Education Credits & Tuition and Fees Deduction

The Hope Credit has been expanded!  Third and Fourth year students are now eligible.  The maximum annual credit increased to $2,500 and up to 40% of the credit maybe refundable.

The Lifetime Learning Credit maximum is still $2,000. 

The above the line deduction for higher-education expenses is extended through 2010. 

These deductions and credits are subject to AGI limitations and we will evaluate your situation to determine which option is best.

For more information, please visit:

http://www.irs.gov/newsroom/article/0,,id=205674,00.html 

 

Consumer Energy Efficiency Tax Credits

The energy tax credit is back for 2009 and 2010!   $1,500 is the maximum credit for home improvements.  Home Builders should review rules to qualify for this credit.

Check out the link for more details.

Not all energy star rated items will qualify for the credit.

  

First-Time Homebuyer Tax Credit

For more information, please visit:

http://www.federalhousingtaxcredit.com/

 

COBRA: Health Insurance Continuation Subsidy

The American Recovery and Reinvestment Act of 2009 establishes an employer-provided subsidy for employees who involuntarily lose their jobs.

For more information, please visit:

http://www.irs.gov/newsroom/article/0,,id=204505,00.html

 

IRA Deduction

The 2010 IRA deduction is $5,000, with a catch-up contribution of $1,000 for taxpayers 50 or older. 

For more information, please visit:

http://www.irs.gov/retirement/article/0,,id=188232,00.html

 

Elective Salary Deferrals

Taxpayers can defer $16,500 under elective salary deferral plans for 2010 ($11,500 for SIMPLE plans). The catch-up contribution limit for taxpayers 50 or older is $5,500 ($2,500 for SIMPLE plans). 

For more information, please visit:

http://www.themoneyalert.com/Retirement-Plan-Limits.html, and

http://www.irs.gov/newsroom/article/0,,id=214321,00.html

 

Standard Mileage Rates

 

Business Mileage Rate     Medical & Moving Rate     Charitable Rate

2010 - 50 cents/mile            16.5 cents/mile                     14 cents/mile

2009 - 55 cents/mile            24 cents/ mile                       14 cents/mile

 

For more information, please visit:

 http://www.irs.gov/taxpros/article/0,,id=156624,00.html 

 

Hybrid Cars and Alternative Fuel Motor Vehicles

The Energy Policy Act of 2005 replaced the clean-fuel burning deduction with a tax credit.  A tax credit is subtracted directly from the total amount of federal tax owed, thus reducing or even eliminating the taxpayer's tax obligation.  The tax credit for hybrid vehicles applies to vehicles purchased or placed in service on or after January 1, 2006.  These credits will end for vehicles place in service after December 31, 2010.

For more information, please visit:
http://www.irs.gov/newsroom/article/0,,id=202341,00.html

Verify that a credit is still available for your make/model before you purchase the car.

 

Cancellation of Mortgage Debt Relief

For tax years 2007 through 2012, if a taxpayer has debt forgiven or cancelled on the personal residence due to loan modification or foreclosure, they may qualify for relief of the tax on that debt forgiveness.  Usually, if debt is reduced or forgiven it must be included as income and subject to income tax.  The Mortgage Forgiveness Debt Relief Act of 2007 allows exclusion of income as a result of reduced debts owed.

For more information, please visit:

http://www.irs.gov/individuals/article/0,,id=179414,00.html

 

Kiddie Tax Extended

Kiddie tax now applies to parents with children up to the age of 18 or age 23 (if a full-time student) with investment income over $1,900 in 2009.  The first $950 is exempt and the next $950 taxed at the child’s tax rate.

For more information, please visit:

http://www.bankrate.com/brm/itax/tips/20010330a.asp

 

Health Savings Account

A Health Savings Account (HSA) is a tax-advantaged medical savings account available to taxpayers who are enrolled in a High Deductible Health Plan (HDHP). This savings account is set up exclusively for paying the qualified medical expenses of the account beneficiary or their spouse and/or dependents. Taxpayer contributions are deductible from AGI. Contributions made by an employer are excluded from income and not subject to employment taxes. In 2010, the contribution limit is $3,050 for self-only and $6,150 for family coverage (if age 55 or older you are allowed a “catch-up” contribution of $1,000). For 2010, contributions must be made by April 15, 2011.

For more information, please visit:

http://www.irs.gov/publications/p969/ar02.html#en_US_publink1000204020  

 

Mortgage Insurance Deduction

Mortgage insurance premiums will be deductible through 2010 as an itemized deduction. This is another relief provision for homeowners. The three requirements are (1) the insurance must be in connection with the home acquisition debt, (2) the contract must have been issued after 2006, and (3) the premiums must be paid during the year.

 

Car Donations

Beginning in 2005, the rules for car donations changed, making such donations less attractive. Previously, taxpayers could deduct the fair market value of cars donated to a charity. However, if the charity sells the car, a taxpayer's deduction is equal to the proceeds received by the charity. If the charity does not sell the car and instead uses the car in furthering its charitable purpose, the taxpayer may be entitled to deduct the vehicle's fair market value if certain conditions are met.

 

Sales Tax Deduction

Sometimes the sales tax you have paid for the year can be a tax write-off.  If you have made any major purchases, you may want to review your options.

For more information, please visit:

http://www.bankrate.com/brm/itax/tips/20050218a1.asp and

http://www.irs.gov/individuals/article/0,,id=152421,00.html

 

Educator Expense

Eligible out-of-pocket expenses paid for classroom materials can be deducted as an above the line adjustment up to $250 for 2008 and 2009.  Amounts above that limit may be deducted but are subject to a floor of 2% of AGI.

 

Ohio Commercial Activity Tax

Commercial Activity Tax (CAT Tax) has been phased in to offset revenue lost from other tax cuts. The rate increased to .26%, effective April 1, 2009. 

Annual CAT Tax returns are now due May 10th. Quarterly filers due dates are the tenth (10th) day of the second month following each tax period (Feb. 10, May 10, Aug. 10, and Nov. 10).

 

Qualified Production Activities Income Deduction

The Code Section 199 qualified production activities deduction went into effect in 2005 and can benefit many businesses. It provides a percentage deduction for the lesser of: (1) a taxpayer's qualified production activities income for the tax year, or (2) taxable income (or, for an individual, adjusted gross income), determined without regard to Code Section 199, for the tax year. The rate for 2008 and 2009 is 6% and then will increase to 9% in 2010 and thereafter.

For more information, please visit:

http://www.irs.gov/formspubs/article/0,,id=177957,00.html

 

 

 

 
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