Increased $8,000 First-Time Homebuyer s Credit (If Choose To Take 2009 Credit on 2008 Return).

Transcription

1 Provisions That May Affect 2008 Returns Increased $8,000 First-Time Homebuyer s Credit (If Choose To Take 2009 Credit on 2008 Return). Extended NOL Carryback Period. 1

2 4/09/08-12/31/08 $7,500 Refundable Credit Paid Back Over 15-Years Recapture If Sell Or No Longer Prin. Residence Must Purchase By 6/30/09 No Credit If Bought With Tax- Exempt Bd. Proceeds No Homebuyer Credit If Qualifies For DC Credit 1/01/09-11/30/09 $8,000 Refundable Credit No Mandatory Pay Back Recapture Only If Sell Etc. First 36 Months Must Purchase By 11/30/09 Okay If Purchased With Tax- Exempt Bd. Proceeds Homebuyer Credit Allowed No DC Credit Allowed 2

3 Example 1 Page 2 Facts: Raymond Is First-Time Homebuyer And Buys Principal Residence On May 1, Ray Marries Debra (Who Has Owned A Principal Residence Within Last Three Years) On June 20, Conclusion: Ray Qualifies For First-Time Homebuyer Credit. 3

4 SECOND EXAMPLE Page 2. Individual Owns Principal Residence Until Rents Former Principal Residence From 2004 Until September 25, Lives In Rented Apartment. Purchases New Principal Residence September 15, She Qualifies For First-Time Homebuyer Credit. 4

5 Residence must Be Purchased( 36(c)(3)) Purchase Means Only Acquisitions Where: Property Not Acquired from Related Party (e.g., Spouse, Parent, Grandparent Child, or Grandchild); Basis of Property Not Determined in Whole or in Part by Reference to Basis of Property of Person from Whom Acquired; and Basis of Property Not Determined under 1014 (Rules for Property Acquired from Decedent). 5

6 EXAMPLE-No Gain On Sale-Page 4 Facts: Purchase Price $ 150,000 Recapture Amount $ (8,000) $ 142,000 Conclusion: No Recapture If Home Sold for $142,000 or less 6

7 EXAMPLES/CO-OWNERS-Page 5 Example 1 Facts: A Contributes 75% B Contributes 25% A Owns 50% B Owns 50% Conclusion: May Allocate- 1) 75% to A 25% to B ; 2) 50% to A 50% to B ; or, 3) Any Other Reasonable Method (e.g., 100% to either A or B ) 7

8 EXAMPLE 2- Notice (Page 5) Facts: A Contributes $10,000 For Down Payment A & B Obtain And Are Jointly Liable On $90,000 Mortgage A Owns 50% B Owns 50% Conclusion: May Allocate- 1) 55% to A 45% to B ; 2) 50% to A 50% to B ; or, 3) Any Other Reasonable Method (e.g., 100% to either A or B ) 8

9 EXAMPLES/CO-OWNERS-Page 5 Example 3 Facts: Purchase Price $100,000 4/15/08 - A Pays 100% B Pays -0-5/12/08 - A Transfers 50% Interest To B For $10,000 Conclusion: May Not Allocate Any of Credit To B. B Acquired His Interest In Part As Gift From A So His Basis Is Determined In Part With Reference To A s Basis. 9

10 EXAMPLES/CO-OWNERS-Page 6 Example 4 Facts: A Contributes 50%. B Contributes 50%. A Owns 50% B Owns 50% A Is First-Time Homebuyer. B Is Not First-Time Homebuyer. Conclusion: May Not Allocate Any of Credit To B. May Allocate Entire Credit To A. 10

11 EXAMPLES/CO-OWNERS-Page 6 Example 5 Facts: A Contributes 75%. B Contributes 25%. A Owns 50%. B Owns 50%. A s MAGI Is $100,000. B s MAGI Is $60,000 Conclusion: May Not Allocate Any of Credit To A (AGI >$95,000). May Allocate Entire Credit To B. 11

12 Sales Or Excise Taxes On Qualified Vehicles Purchased From 2/17/09-12/31/09 Qualified Vehicle - Generally a NEW 1) Car or Truck 8,500 lbs or Less, 2) Motorcycle 8,500 lbs or Less, and 3) Motor Home Deductible As Taxes If Itemize. Deductible As Additional Standard Deduction If Use Standard Deduction Deduction Allowed To Reduce AMTI Sales Or Excise Tax On Purchase Price > $49,500, Not Deductible Phase Out: From $250,000 to $260,000 AGI Jt From $125,000 to $135,000 AGI S Not Allowed If Deduct State & Local Sales Taxes 12

13 90% Of 2008 Tax Safe Harbor For AGI Below $500,000 ($250,000 Filing Separately) > 50% Of 2008 Gross Income From Business With < 500 Average Employees During Calendar-Year 2008 Individual Certifies That > 50% Of 2008 Gross Income From Business With < 500 Average Employees During Calendar-Year

14 Additional Standard Deductions Available For 2009 (Item 7, Page 7) Age And/or Blindness for 2008 and 2009, Real Estate Property Taxes (Up to $1,000 J, $500 S) for 2008 & 2009, Casualty Losses Incurred in Presidential Disaster Areas for 2008 and 2009 Disasters, and Sales or Excise Taxes Paid on Qualified Vehicles for

15 Deductible For AMT Purposes Casualty Losses Incurred In Presidential Disaster Areas for 2008 and 2009 Disasters, and Sales or Excise Taxes Paid on Qualified Vehicles For

16 Hope Credit (For 2008) 100% x $1, % x $1,200 = Max $1,800 Allowed Up To 2 Years Not Allowed after 2 Years of College Phase out as AGI Goes from $100,000-$120,000 $50,000-$60,000 Single American Opportunity Credit (For 2009 & 2010) 100% x $2, % $2,000 = Max $2,500 Allowed Up To 4 Years Not Allowed after 4 Years of College Phase Out as AGI Goes From $160,000-$180,000 $80,000-$90,000 Single 16

17 Credit Not Refundable Qualifying Expenses Include Tuition & Fees 4 0 % o f C r e d i t Refundable If Taxpayer Is Not a Student Subject To the Kiddie Tax Qualifying Expenses Include Tuition, Fees & R e q u i r e d C o u r s e Materials (e.g., Books). 17

18 Phase-Outs Page 9, Item 9 American Opportunity Credit: $160,000 to $180,000-Jt $80,000 to $90,000-S Lifetime Learning Credit: $100,000 to $120,000-Jt $50,000 to $60,000-S For AGI Higher Education Expense Deduction: $4,000 - $130,000 or Less-Jt $65,000 or Less-S $2,000 - $130,001-$160,000-Jt $65,001-$80,000-S $-0- - >$160,000-Jt >$80,000-S 18

19 Making Work Pay Refundable Credit 2009 & 2010 Credit 6.2% of Earned Inc. Max $800-J Max Credit Where Earned Inc = $12,903-J $400-S $6,452-S Phase Out As AGI Goes From: $150,000 to $190,000-J $ 75,000 to $ 95,000-S Must Have SS Number (At least One Spouse Jt. Ret.) Reduced By 1) $250 Economic Recovery Payment, and 2) $250 Credit for Government Retirees. Credit for Individuals Except Those: 1) That Are Nonresident Aliens and 2) Who Can Be Claimed as a Dependent by Another Taxpayer. 19

20 $250 Economic Recovery Payment For 2009 Qualifying Individuals Are Individuals Eligible for One of the Following Benefits for November 2008, December 2008, or January 2009: Social Security Retirement or Social Security Disability Benefits; Veteran s Compensation or Veteran s Pension Benefits; Railroad Retirement Benefits; or Supplemental Security Income. Payments To Begin No Later Than June 17, Payments Not Made By IRS 20

21 $250 Refundable Credit For Government Retirees For 2009 Qualifying Individuals Are Individuals Who: During 2009 Receive A Government (U.S., State, or Local Government) Pension or Annuity From Work Not Covered By Social Security, Aren t Eligible To Receive an Economic Recovery Payment, and Have a Valid Social Security Number (On Joint Return at Least One Spouse Has Social Security Number). 21

22 Max Lifetime $500 Credit Prior to %-Qualifying Insulation, Windows(Max Cr. $200), Doors, & Roofs. 100%-Energy-Efficient Fans (Max $50); Furnaces & Boilers (Max $150); Heat Pumps, Water Heaters, & Biomass Fuel Stoves (Max $300). Expenditures From Energy Subsidized Financing Do Not Count. Max $1,500 Aggregate Credit For 2009 & % of Costs Not 10%. 30% of Costs Not 100% With No $50, $150, or $300 Maximums. Expenditures From Energy Subsidized Financing Do Count. 22

23 Must Meet Energy-Efficient Guidelines To Qualify. Guidelines Modified For Property Placed In Service After 2/17/09. In IR , IRS Says Taxpayers May Rely On Mfgs Certifications and Energy Star Labels (for windows & skylights) For Property Purchased Before 6/01/09. Note! Go to and Click on Tax Credits for Energy Efficiency for Qualifying Property. See Page 12, Item g of Manual. 23

24 Credit for Residential Solar, Geothermal, and Wind Energy Property Before 2009 Credit-30% of Cost $2,000 Cap per Year For: Solar Water Heaters, Solar Electric Generating Property, and Geothermal Heat Pumps. $4,000 Cap per Year for Small Wind Generating Property. Subsidized Energy Financed Property Non Qualifying After 2008 Credit-30% of Cost $2,000 Caps Removed Property Installed After $4,000 Cap Removed Property Installed After Subsidized Energy Financed Property Qualifies 24

25 AMT Higher Exemption Amounts Extended Through 2009: Joint Returns Singles Married Filing Sep $69,950 $46,200 $34, $70,950 $46,700 $35, $45,000 $33,750 $22,500 Personal Credits Allowed To Reduce AMT (e.g., Dependent Care, Child, Elderly and Disabled, and Higher Education Credits). 25

26 No Credit For Toyota Or Honda Hybrid or Lean-Burn Vehicles. Percentage of Hybrid & Lean-Burn Vehicle Credits Allowed For Ford Vehicles: Before 4/01/09-100% 4/01/09 Thru 9/30/09-50% 10/01/09 Thru 3/31/10-25% After 3/31/ % For a Listing of Qualifying Vehicles Go to and Type Hybrid Cars and Alternative Fuel Vehicles. 26

27 Increase EITC 2009 & 2010 For Taxpayers with 3 or More Children: Increase EITC Credit from 40% to 45% of $12,570 (Indexed after 2009). Therefore, Max EITC for 2009 with 3 or More Children Is $5, (An Increase of $628.50). For All Individuals Filing Jointly: Increases Income for Purposes of Phase out of Credit. E.G Phase out for Families with Three Children Is $21,420-$45,295 (Previously $19,540 to $43,415). 27

28 Refundable Portion of Child Credit Increased 2009 & 2010 Example for Individual with One Child. Pre-Act New Earned Income $15,167 $19,217 $9,667 $9,667 Less ($ 8,500) ($12,550) ($3,000) ($3,000) $ 6,667 $ 6,667 $6,667 $6,667 x.15 x.15 x.15 X.15 Refundable Amt. $1,000 $1,000 $1,000 $1,000 28

29 Computer Services May Be Paid From 529 Plan For 2009 & 2010 Qualifying Expenses 2008: Tuition, Fees, Books, Supplies, and Equipment Required for the Enrollment or Attendance of a Designated Beneficiary at an Eligible Educational Institution. For 2009 And 2010, The Act Adds: Computer Technology; Computer Equipment (i.e., A Computer, Computer Related Peripheral Equipment, Fiber Optic Cable Related to Computer Use); or Internet Access and Related Services. If Used by the Beneficiary and the Beneficiary's Family During Any of the Years the Beneficiary Is Enrolled at an Eligible Educational Institution. 29

30 Qualified Small Business Stock Exclusion Increased For Stock Acquired From 2/18/09 Thru 12/31/10 Exclusion 50% Prior Law Reg Tax Rate Before Exclusion 28% Effective Reg Tax Rate 14% Effective AMT Rate 14.98% May Also Receive Exclusion For State Income Tax Purposes Exclusion 75% Act Reg Tax Rate Before Exclusion 28% Effective Reg Tax Rate 7% 12.88% May Also Receive Exclusion For State Income Tax Purposes 30

31 NOL Carryforward And Carryback Rules General Rule Back 2 Forward 20 NOLs of Individuals Attributable To Casualty or Theft Back 3 Forward 20 NOLs Attributable to Federal Disaster of Business With Avg Gross Receipts of $5 Mil or Less Back 3 Forward 20 NOLs of Farmers Attributable to Federal Disaster Back 3 Forward 20 NOLs of Farmers Attributable to Farm Operations * Back 5 Forward NOLs Qualified Business Back 2, 3, 4, or 5 Forward 20 * 2008 & 2009 NOL Attributable To Federal Disaster Back 5 Forward 20 31

32 Rules For Eligible Small Businesses NOLs For 2008 Eligible Small Business (Item 3 P. 20) Means C Corp, S Corp, Partnership, or Proprietorship with Average Gross Receipts For 3 Years Ending With NOL Year of $15 Million or less. Election Available (Item 4, P. 20): 2008 NOL For Calendar Year Taxpayers. NOL For Year Ending In 2008 For Fiscal-Year Taxpayers Fiscal-Year Taxpayers May Elect Extended Carryback for NOL For Year Beginning in 2008 Rather Than Ending in 2008 Not Both. 32

33 NOL Examples Page 22 EXAMPLE 1 Facts: Partnership A Partnership B Partnership C Gross Receipts $10 Mil $12 Mil $14 Mil No Aggregation Under 448(c)(2) Taxpayer Owns 40% of Each Partnership Conclusion: Taxpayer May Utilize 3, 4, or 5 year Carryback Election For Portion of NOL Attributable to Partnerships A, B, and/or C. 33

34 EXAMPLE 2 Facts: Partnership A Partnership B Partnership C Gross Receipts $10 Mil $12 Mil $14 Mil A & B G/R Must Be Aggregated Under 448(c)(2) Taxpayer Owns 40% of Each Partnership Conclusion: Taxpayer May Utilize 3, 4, or 5 year Carryback Election Only For Portion of NOL Attributable to Partnership C. 34

35 Credits For Energy Saving Vehicles Plug-In Low Speed And 2 & 3 Wheeled Vehicles (2/17/09-12/31/11): 10% of Cost Maximum $2,500 Credit Plug-In Electric Vehicles With 4 Wheels (Acquired After 2009): Credit $2,500 Plus $417 For Each Kilowatt of Capacity > 5 Kilowatt Hours Converting Vehicles to Plug-In Electric Vehicles (In Service After 2/17/09 For Conversions Made Before 2012): 10% of Conversion Cost Up To $40,000 of Costs (i.e., Max Credit is $4,000). Note! For Personal-Use Vehicles, All Three Credits May Offset AMT. 35

36 Irrevocable Election To Extend Carryback Period (Rev Proc & Rev Proc Pages 21 & 22) Original Timely Filed Return.! Generally, By Due Date of Return Including Extensions.! 1) State Taxpayer Electing Under 172(b)(1)(H) To Carry Loss Back Years (3, 4, or 5 yrs). P. 22 2) If Applicable, State Taxpayer Electing To Apply 172(b)(1)(H) To Tax Year Beginning In Amended Return-If Did Not Waive Carryback.! Later of, Six Months After Due Date Of Return (Excluding Extensions), or 4/17/09.! Elect Carryback Period By Filing Form 1045 or 1139 or By Filing Amended Returns For Carryback Years. (Page 22) 36

37 Amended Return For Y/E Before 2/17/09 Where Waived Carryback.! Revocation of Waiver And Election of Extended Carryback Period No Later Than 4/17/09.! Elect Carryback Period By Filing Form 1045 or 1139 or By Filing Amended Returns For Carryback Years. (Page 22) Note! 172(b)(H)(iii) Says That Once an Election Is Made to Carry an NOL Back 3, 4, or 5 Years, the Election Is Irrevocable. 37

38 50% 168(k) (Pages 25, 26, and 27) New Property Acquired And Placed In Service Calendar Year 2008 And 2009 Qualified Property Is Generally, 20-yr or < Class Life (P. 25) Cost Segregation - 179, 168(k), DDB With Shorter Lives Place In Service 2008 & However, Property With Long Construction Period-or Qualifying Airplanes, 2008, 2009, or 2010 (Pages 25 & 26) Generally Placed-In-Service Means Ready and Available for Use. Can Create or Add To NOL And Carry Back 2, 3, 4, or 5 Years For 2008 (Page 26, Item 5) 38

39 NEW SUV GVW >6,000LBS USED 100% IN BUSINESS: COST $50, DEDUCTION $25, (k) DEDUCTION $12,500 MACRS $ 2,500 TOTAL $40,000 39

40 Work Opportunity Tax Credit Page 31 Two New Categories For 40% Max $2,400 Credit Unemployed Veterans- Discharged for Service-connected Disability Within Last 5-years Received Unemployment Compensation at Least 4 Weeks During One Year Period Ending on Hiring Date Disconnected Youth- At Least 16, but Not 25 Not Attending Secondary, Technical, or Post-secondary School and Not Employed During Last 6 Months Prior to Hire Lacking Sufficient Number of Skills to Be Employable 40

41 COBRA Premium Assistance Page 31 COBRA Rules Apply To Employers With at Least 20 Employees Government Subsidizes 65% of COBRA Premiums Subsidy For Up to Nine Months Beginning on February 17, 2009 Employee Must Be Involuntarily Terminated (Notice , P. 32) After 9/01/08 and Before Subsidy Recaptured As AGI Goes From $125,000-$145,000 on Single Return and From $250,000-$290,000 on a Joint Return Employer Pays 65% of Premium and Takes Credit on Form 941 (IR , P. 32) 41

42 Madoff-Type Theft Losses From Transactions Entered Into For Profit (Rev Rul , Page 42) IRS Conclusions: Loss Is Ordinary Theft Loss Under 165, Not Capital Loss Loss Not Subject To $100 ($500 for 2009) or 10% of AGI Reduction Not Subject To 67 2%-of-AGI Reduction or 68 Reduction For Itemized Deductions Loss Generally Deductible When Discovered Amount of Theft Loss is 1) Amount Invested Less Withdrawals; 2) Plus Amounts Reported As Income And Reinvested In Scheme; 3) Minus Reimbursements, Recoveries, and Claims With Reasonable Prospect of Recovery Loss Considered Loss From Proprietorship for Purposes of 3, 4, or 5 Year NOL Carryback Election 42

43 Safe Harbors For Losses From Ponzi Schemes (Rev Proc , Page 44) Loss Year Safe Harbor. Qualified Investor May Treat As Year of Discovery Year In which Indictment, Information, or Complaint is Filed. Deduction Safe Harbor. Qualified Investor May: Deduct 95% of Loss Less 1) Any Actual Recovery and 2) Any Potential Insurance/SIPC Recovery. 75% Is Substituted for 95% If Investor Is Pursuing Any Potential Third Party Recovery. To Be a Qualified Investor Must Have Invested Directly In Scheme See Item 7, Page 46 For Procedures For Utilizing Safe Harbors Including Completion of Appendix A of Rev Proc Note! For Returns Filed Before 4/17/09, Appendix A May Be Filed by 5/15/09. 43