Important Tax Law Changes affecting Tax Year 2009
• Long-term Capital Gains: Beginning in 2008, the 5% tax rate on long-term capital gains is reduced to 0. Yes, you read that right. Zero. This special rate is available to taxpayers in the 10 or 15% tax brackets. (This is taxable income (after deductions) of $33,950 or less, $67,900 or less on Married Filing Joint returns.) This rate will continue to apply through 2010. For taxpayers in higher tax brackets, the long-term capital gain rate is still 15%.
• First time home-buyer credit: If you have not owned a home in the last two years and purchased a home between April 8, 2008 and December 31, 2008, you may choose to take a new credit up to $7,500. This credit is essentially an interest free loan, which must be repaid evenly over 15 years, beginning in 2010. If you purchased a home between January 1, 2009 and December 1, 2009, the tax credit is $8,000 and it does NOT have to be repaid. Income limitations apply.
• Charitable Donations: This was new for 2007, but it’s worth repeating. All charitable donations MUST be supported by bank records (canceled checks) or receipts from the charity. Logs to track cash donations are no longer sufficient. For non-cash contributions (clothing, household goods, etc.), items must be in “good or better” condition in order to be deductible.
• IRA Contributions: The maximum IRA contribution is $5,000 ($6,000 if you are over 50). If you are interested in making a contribution, please ask how it will affect your tax situation and whether Traditional or Roth contributions would be more beneficial.
• Gifts: The annual gift exclusion for 2009 is $13,000. You may gift anyone up to $13,000 without tax consequence (to you or the recipient).
If you have any questions about how these or other tax law changes affect you, please contact us for a complimentary planning appointment.