November 29, 2009

CONGRESSIONAL UPDATE

Congress has finally passed the Worker, Homeownership, and Business Assistance Act of 2009 (a.k.a the “2009 Worker Act) on November 6, 2009, which updates the existing law concerning the first time homeowners’ credit with the following changes:

1. Congress has extended the time from December 1, 2009 until May 1, 2010, however, if you have a written, binding agreement prior to May 1, 2010, then the credit will be allowed as long as the property closes before July 1, 2010;
    
2. The credit is phased out if your income exceeds $ 225,000 ($ 125,000 for single), up from the original of $ 150,000 ($ 75,000 for single) for purchases made after November 6, 2009;
    
3. Due to a large number of abuses of the law, Congress has expanded the related person restriction to include related people of the spouse also;
    
4. Beginning with purchases after November 6, 2009, the credit has been expanded to allow for not only first time homeowners, but also long-time homeowners (same residence for five of the last eight years) who are purchasing a replacement home.  This provision is aimed at taxpayers who are “stepping up” to larger homes or to those taxpayers who are retiring and are “downsizing”.

Source: Kleinrock CCH Practical Tax Bulletin, Issue 24, November 24, 2009

-----------------------------------------------------

November 3, 2009

2010 IRS updates

The Internal Revenue Service has issued inflation adjusted number for tax years beginning in 2010:

• The phaseout for itemized deductions will be eliminated, so all itemized deductions will be eligible regardless of your income level;
   
• Personal exemptions will be increased to $ 3,650 with no income level phaseout;
   
• Child tax credit will be $ 3,000;
   
• The maximum Hope Scholarship credit will be $ 2,500 with an income phaseout beginning at $ 80,000 (single) and $ 160,000 (MFJ),  Note: in 2010, 40% of the Hope Credit is a refundable credit, which means you could possible get back an additional $ 1,000 is your income tax is zero;
   
• There are various other inflation adjusted numbers concerning Earned income credit, Section 179 depreciation, Long term care premiums, student loan interest, gift tax exclusions, etc.  Please call if you have any questions concerning these items.

Tax Highlights

 The IRS had updated the first time home buyers credit form.  Starting in 2009, you must send a copy of the HUD closing statement along with the most recent mortgage statement in order to verify the purchase.  In addition, you must send a copy of at least two of these items: drivers license, pay stub, bank statement or automobile registration to prove that the home is your principal residence.  Remember, this credit is set to expire on November 30, 2009.

There is currently a bill in the Senate to extend this credit for six more months.  We will keep an eye out for any further developments.

Source:  Kleinrock Practical Tax Bulletins Issues 21 and 22