Proper Tax Planning Will Tap Opportunities for Many Taxpayers in 2009 and 2010
March 11th, 2009 by James Guarino
The recent passage of the Stimulus Package (American Recovery and Reinvestment Tax Act of 2009) creates a wealth of tax planning opportunities for 2009 and 2010. The goal of the Stimulus Package is to provide money to taxpayers; the Government’s plan is create an incentive for taxpayers to spend their money in order to stimulate the economy and create jobs.
As the saying goes, “the devil is in the details” – most of the new rules are complicated, technical and temporary. The Stimulus Package includes a wide range of components, many of which can be broken out into three main categories intended to impact particular taxpayers and various aspects of the economy. The three main categories include Individuals, Small Businesses and Low Income/Unemployed Taxpayers.
• Individuals – Families, Education, Real Estate and Auto Industry.
• Small Businesses – Additional Depreciation Elections, Net Operating Losses, Conversion of C-Corp to S-Corp, Work Opportunity Credits.
• Low Income/Unemployed Taxpayers – Enhanced unemployment benefits, COBRA health insurance subsidy, One-time Social Security benefit payments.
Some of the more prominent tax law provisions in the Stimulus Package are available for 2009 and 2010 only; they include the following categories (here is a .pdf summary of the provisions from MFA and a more detailed report from the government):
• Make Work Pay Credit – $400/$800 refundable income tax credit for individuals in 2009 and 2010
• First-time Homebuyer Credit – up to $8,000 tax credit for first-time homebuyers through December 1, 2009
• AMT exemption Amount – Alternative Minimum Tax exemption amount increased for 2009
• Deduction of Taxes paid on Car Purchase – tax deduction for sales/local tax paid on car purchase of $49,500 or less through 2010
• American Opportunity Tax Credit – former Hope Scholarship Tax Credit now available for education expenses up to 4 years & increased to $2,500 for 2009 and 2010
• Bonus First Year depreciation – first year, additional 50% depreciation expense retained for 2009
• Section 179 Expensing – up to $250,00 first year expensing election retained for 2009
• Small Business Estimated Tax Payment Relief – lower estimated tax requirement threshold available to small business owners for 2009
• COBRA Insurance Continuation – employees are only responsible for 35% of COBRA health insurance premiums (up to 9 months)
• Enhanced Unemployment Benefits – First $2,400 of benefits are tax-free, benefits extended to 46 weeks, increase in benefits of $25 per week
In general, many of the above law changes affect individuals (or businesses) that do not exceed certain income thresholds and phase-outs.
This is a particularly beneficial time of year to be working closely with your CPA/tax advisor. They can assist you to determine how key strategic planning performed now can impact you, your family’s (and/or your business’) income tax reporting for 2009 and 2010.
