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TOP 10--New 2009 Tax Savings Opportunities As part of the overall stimulus, there are a number of new tax saving opportunities in 2009. Since they were designed for the short term, many of them expire at the end of the year. Here are 10 worth investigating Education - Tuition. The American Opportunity Tax credit (sometimes called the Hope education credit) has increased from $1,800 to a maximum of $2,500. It can be used for qualified education expenses (including tuition) incurred in 2009 and 2010. In addition to tuition, it now covers expenses for books, supplies and equipment. It also applies to the first four years rather than two.
- Computers. You may now use assets in a 529 plan to purchase computers in 2009 and 2010 for educational use with no penalty.
Energy - Energy-efficient home improvements and products.
· Energy-efficient home improvements. Tax credit of 30% of the cost (to a maximum of $1,500 aggregate credit for 2009 and 2010) for insulation, energy-efficient exterior windows and heating and air conditioning systems. · Residential alternative energy products. Tax credit for 30% of the cost of alternative energy equipment such as solar hot water heaters. - Hybrid vehicles. During 2009--in addition to the credit that has existed since 2005--buyers can receive a credit of up to $3,000, depending on a phase-out that varies by manufacturer. You can also plan ahead--in 2010, there will also be a new credit for up to $7,500 for the purchase of a plug-in electric drive vehicle.
Job transition - Unemployment compensation. The first $2,400 of unemployment benefits an individual receives in 2009 is tax-free.
Real estate - First-time home. Qualified first-time homebuyers who purchase a home on or after January 1, 2009 and before December 1, 2009 may qualify for a tax credit of 10% of the cost of their new home up to $8,000. This is a modification of a credit that existed in 2008. In 2010, a $6,500 tax credit will be available to long time home owners.
Retirement - RMD waiver. For the 2009 tax year only, required minimum distributions are waived.
- Roth IRA conversion. If you are above the income threshold to contribute to a Roth IRA this year, you can make a non-deductible IRA contribution during 2009 and convert it to a Roth IRA during 2010, when the income limitation for Roth conversions is no longer in effect. If you have other pre-tax IRA assets special tax rules apply to this strategy, so talk to your financial advisor and tax professional.
Small business - Small business stock. If you have purchased qualified small business stock after February 17, 2009 and before December 31, 2010 and you hold your investments for five years, you can exclude from taxation 75% of the capital gains upon sale or exchange.
Transportation - New vehicles. You are eligible to receive a deduction for state and local sales and excise taxes when you purchase a new car, light truck, motor home or motorcycle during 2009.
Make sure you don't miss out on these and other tax opportunities. Talk to both your financial advisor and a tax professional.
2009 Tax Tips for Investments For most of us, tax strategies mean that we look to minimize this year's taxes. Here are some ideas to help with that, and with taxes in the future as well.Reduce Capital Gains Taxes You can sell securities at a loss to reduce and possibly eliminate capital gains taxes. You can not only deduct up to $3,000 of the remaining net capital loss from your taxable income this year to offset other income on your return. Then you can carry any remaining capital loss forward into subsequent tax years. Be aware of the wash-sale rule: if you buy back a stock (or buy a substantially identical stock) within 30 days of the sale, you can't take the deduction. Consider municipal bonds Municipal bonds can be particularly attractive if you are in the 28% tax bracket or higher. Income on bonds is generally exempt from federal income tax, and bonds issued within your own state can also be exempt from state income tax. Note that interest from certain municipal bonds may be subject to the alternative minimum tax (AMT) and state and local taxes. Also, sales of these instruments can generate capital gains or losses. Focus on tax diversification
By building a portfolio that contains a mix of taxable, tax-deferred and tax-free investments, you can gain the flexibility you'll need when it comes time to pay for retirement, college and other critical financial goals.
Tax Planning Checklist Here's a checklist for the end of the year. In any of these areas, be sure to check with your tax professional or financial advisor. __ Assess gains and losses to minimize taxes __ Rebalance your portfolio __ Identify mutual fund distributions __ Save for education __ Make retirement plan contributions __ Prepare for Required Minimum Distributions to start up again __ Explore charitable giving options __ Consider gifting strategies __ Accelerate, defer or shift income according to your situation __ Check your federal income tax withholding levels __ Calculate any Alternative Minimum Tax liability __ Maximize deductions __ Prepare for tax time
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