Knight Accounting and Technology

New this year, the IRS is adding yet another option for getting your tax refund.  In addition to a paper check (which I NEVER recommend), direct deposit to a checking or savings account, and making an IRA contribution, this year you will also be allowed to purchase U.S. Savings Bonds.  These Series I Savings Bond can be purchased in increments of $50, $100, $200, $500, and $1,000, but cannot be redeemed for 12 months after you receive them.  And, if redeemed within the first five years, the three most recent months’ interest will be forfeited.  While you can only have Savings Bonds issued in your own name during the 2010 filing system, you will be able to add co-owners, such as child and grandchildren in the future.

It’s Official!  The Worker, Homeownership, and Business Assistance Act of 2009 has established a tax credit of up to $6,500 for qualified move-up/repeat home buyers (existing home owners) purchasing a principal residence after November 6, 2009 and on or before April 30, 2010 (or purchased by June 30, 2010 with a binding sales contract signed by April 30, 2010). 

The Act has also extended the tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence. The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.  For sales occurring after November 6, 2009, the Act establishes income limits of $125,000 for single taxpayers and $225,000 for married couples filing joint returns.  The income limits for sales occurring on or after January 1, 2009 and on or before November 6, 2009, are $75,000 for single taxpayers and $150,000 for married taxpayers filing joint returns.

For more on these new credits, visit my source: http://www.federalhousingtaxcredit.com/home.html.

This just in…Congress is talking about expanding the homebuyers credit beyond first time purchases, and giving a $6,500 credit to buyers who’ve owned a home for five of the last eight years.  While this hasn’t passed yet, it’s food for thought if you are in the market to purchase a house and you can hold off until November 30th when the new law is set to be enacted!

There’s a new, albeit small, benefit this year if you’re in the market for a new car.  If you purchase a new car between 2/17/09 and 12/31/09, you can take a deduction for the sales tax paid on that purchase up to the first $49,500 of the purchase price.  This is phased out for those with Adjusted Gross Income above $250,000 for MFJ and above $125,000 for all other taxpayers.  How does this help you?  If you purchase a $40,000 vehicle and your local sales tax rate is 7%, then you would get a tax deduction of $2,800.  You would then multiple $2,800 times your effective tax rate, and that’s your savings.  Let’s say your effective tax rate (your tax liability on line 56 divided by your total income on line 43) is 15%, then your savings would be $420.  So, does this make me want to run out and buy a new car?  Definitely not.  But, if you’re in the market for a new car and the deals are good, it makes sense to make the purchase before year-end rather than wait until 2010 (unless, of course, the government extends this tax deduction, but we won’t know that until late December).

Check out my latest Summit Daily Article, the Perils of Paperless Banking.

The American Opportunity Tax Credit was buried quite deep in the stimulus package…to be honest, I’m just now seeing news of it over the various IRS newswires, but it’s pretty darn cool!  It basically extends the HOPE Credit, which has been around for years and offered families with incomes less than $96,000 (or singles less than $48,000), a credit of $1,800 off their taxes for their children’s first two years of education.  But, the extension is bigger and better!  The income limits are increased to AGI’s of $160,000 for married filing jointly ($80,000 for singles) and the credit is increased to $2,500 and up to four years of education!   Forbes has put together a good website with all the details, but I just wanted to make you aware of the potential benefit to your family!  If you have a way to do a little tax planning at year end to keep your income under the $80,000/$160,000 income limits, this may be a great year to do so!  And, if you know anyone else who may benefit from this information, please forward it along to share!

A great question keeps resurfacing about which energy efficient improvements qualify in 2009. As you may remember, this credit was available in 2006 and 2007, then disappeared in 2008, but has been passed again for 2009 and 2010. They don’t make it easy, do they?!?!? As it stands for 2009 and 2010, the credit is available for certain Windows, Doors, Insultation, Roofs, HVAC, Water Heaters, and Biomass Stoves, and is equal to 30% of the cost of equipment up to $5,000 (which is a credit of up to $1,500). This maximum $1,500 credit is spread over the two years, so while you can purchase items in separate years, there is a maximum of $1,500 total, not per year. Now for the tricky part…every category has VERY specific requirements, right down to the R-value of the insulation. For more details on which purchases qualify, please visit the Energy Star website.  As a side note, qualified solar, geothermal and wind systems earn a credit of 30% with no cap on the cost, so if you’re looking into those, the benefits are far greater.

I’m now a columnist for the Summit Daily!  While I’ve published several textbooks in the past and been featured in a national publication, TaxPro Journal, there is something very special about being in our hometown newspaper.  The article itself, How to Protect Yourself from IRS and Email Scams, can be found at this link: http://www.summitdaily.com/article/20090929/BUSINESS/909289980&parentprofile=search.  Please check it out, and if there’s any topics you want to read more about, please let me know!

Welcome to my first blog!  I’m finally making the jump to the digital age, and this is my first step.  I hope to use this blog as a way to communicate ever-changing tax tips and tricks to my clients, and I hope that anyone else who happens to stumble upon it will find the information useful.