Source IRS.
Saturday, February 28, 2009
Tax rates on qualified dividends
Do you know that your taxable income thresholds will determine if your qualified dividends are taxed at a 0% tax rate. Yes, that is not a typo, no tax at all.
Credit available for first time homebuyers
Are you a first-time homebuyer?... You could qualify! You must not own a main home during the prior three years. The credit could go up to $7,500. However, you must have bought your home by the applicabe date to qualify, even if you purchase your home in in the first part of 2009.
Source IRS.
Recovery Rebate credit
The economic stimulus payment we receive last year is tax free and should not be reported on the 2008 tax return. However, this rebate could affect your Revovery Rebate Credit. How so? A tax payer may qualify for the credit if he/she did not get a stimulus payment or had a child last year.
Saturday, December 27, 2008
2009 changes
Key changes affecting 2009 returns, filed by most taxpayers in early 2010, include the following:
- The value of each personal and dependency exemption, available to most taxpayers, is $3,650, up $150 from 2008.
- The new standard deduction is $11,400 for married couples filing a joint return (up $500), $5,700 for singles and married individuals filing separately (up $250) and $8,350 for heads of household (up $350). Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
- Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $67,900, up from $65,100 in 2008.
- The maximum earned income tax credit for low and moderate income workers and working families with two or more children is $5,028, up from $4,824. The income limit for the credit for joint return filers with two or more children is $43,415, up from $41,646.
- The annual gift exclusion rises to $13,000, up from $12,000 in 2008.
Interest Rates Drop for the First Quarter of 2009
The Internal Revenue Service today announced in Revenue Ruling 2008-54 that interest rates for the calendar quarter beginning Jan. 1, 2009 will drop by one percentage point. The new rates will be:
- Five (5) percent for overpayments [four (4) percent in the case of a corporation];
- Five (5) percent for underpayments;
- Seven (7) percent for large corporate underpayments; and
- Two and one-half (2.5) percent for the portion of a corporate overpayment exceeding $10,000.
IRS Speeds Lien Relief for Homeowners
The Internal Revenue Service an expedited process that will make it easier for financially distressed homeowners to avoid having a federal tax lien block refinancing of mortgages or the sale of a home.
If taxpayers are looking to refinance or sell a home and there is a federal tax lien filed, there are options. Taxpayers or their representatives, such as their lenders, may request that the IRS make a tax lien secondary to the lien by the lending institution that is refinancing or restructuring a loan. (Source: IRS)
Wednesday, October 8, 2008
HOW TO CLAIM CASUALTY LOSSES
A casualty loss can result from the damage, destruction or loss of your property from any sudden, unexpected, and unusual event such as a flood, hurricane, tornado, fire, earthquake or even volcanic eruption.
If your property is not completely destroyed, or if it is personal-use property, determine your loss from a casualty by first figuring the decrease in fair market value of your property.
If the property was held by you for personal use, you must further reduce your loss by $100. The total of all your casualty losses of personal-use property must be further reduced by 10% of your adjusted gross income.
If your business or income-producing property is completely destroyed, the decrease in fair market value is not considered.
If your main home, or any of its contents, is damaged or destroyed as a result of a disaster in a Presidentially declared disaster area, do not report any gain due to insurance proceeds you receive for unscheduled personal property, such as damaged furniture, that was part of the contents of your home.
You can choose to postpone gain from any other insurance proceeds received for your main home or its contents if you purchase replacement property within four years after the close of the first tax year in which any gain is realized. For this purpose, insurance proceeds received for the home or its contents are treated as being received for a single item of property, and any replacement property you purchase that is similar or related in service or use to your home or its contents is treated as similar or related in service or use to that single item of property. Again, postponement of gain is only available if the amount you spend on replacing or repairing your property is equal to, or exceeds, the insurance proceeds you receive. Otherwise, you must recognize gain to the extent that the insurance proceeds are more than the cost of your replacement property. Renters qualify to choose relief under these rules if the rented residence is their main home.
If your home is located in a Presidentially declared disaster area and your state or local government orders you to tear it down or move it because it is no longer safe to live in, the resulting loss in value is treated as a casualty loss from a disaster. Figure your loss in the same way as any other casualty loss of personal-use property. The State or local government order must be issued within 120 days after the area is declared a disaster area. This are the general rule, and they are exceptions. (Source IRC.)
If your property is not completely destroyed, or if it is personal-use property, determine your loss from a casualty by first figuring the decrease in fair market value of your property.
If the property was held by you for personal use, you must further reduce your loss by $100. The total of all your casualty losses of personal-use property must be further reduced by 10% of your adjusted gross income.
If your business or income-producing property is completely destroyed, the decrease in fair market value is not considered.
If your main home, or any of its contents, is damaged or destroyed as a result of a disaster in a Presidentially declared disaster area, do not report any gain due to insurance proceeds you receive for unscheduled personal property, such as damaged furniture, that was part of the contents of your home.
You can choose to postpone gain from any other insurance proceeds received for your main home or its contents if you purchase replacement property within four years after the close of the first tax year in which any gain is realized. For this purpose, insurance proceeds received for the home or its contents are treated as being received for a single item of property, and any replacement property you purchase that is similar or related in service or use to your home or its contents is treated as similar or related in service or use to that single item of property. Again, postponement of gain is only available if the amount you spend on replacing or repairing your property is equal to, or exceeds, the insurance proceeds you receive. Otherwise, you must recognize gain to the extent that the insurance proceeds are more than the cost of your replacement property. Renters qualify to choose relief under these rules if the rented residence is their main home.
If your home is located in a Presidentially declared disaster area and your state or local government orders you to tear it down or move it because it is no longer safe to live in, the resulting loss in value is treated as a casualty loss from a disaster. Figure your loss in the same way as any other casualty loss of personal-use property. The State or local government order must be issued within 120 days after the area is declared a disaster area. This are the general rule, and they are exceptions. (Source IRC.)
Hurricane IKE disaster relief
IRS:
IF you live in a IKE disaster area:
Tax return filing, tax payments, and certain other acts are postponed ‘til Jan 5, 2009. Applies to individuals as well as businesses. However, you must inform the IRS before taking the relief.
Casualty losses can either be claimed this year or on last year tax return, you have the option. Call your accountant which alternative benefits you the most.
State of Texas:
If you live in the IKE disaster area:
Labor charges for repair or remodeling performed on residential property are not subject to sales tax. However, materials used during the repair or restoration are taxable, even in a disaster area. Make sure that the contractor calls for a single charge that includes materials and labor.
Motel and Hotel taxes suspended for 14 days beginning Sept. 8, 2008.
IF you live in a IKE disaster area:
Tax return filing, tax payments, and certain other acts are postponed ‘til Jan 5, 2009. Applies to individuals as well as businesses. However, you must inform the IRS before taking the relief.
Casualty losses can either be claimed this year or on last year tax return, you have the option. Call your accountant which alternative benefits you the most.
State of Texas:
If you live in the IKE disaster area:
Labor charges for repair or remodeling performed on residential property are not subject to sales tax. However, materials used during the repair or restoration are taxable, even in a disaster area. Make sure that the contractor calls for a single charge that includes materials and labor.
Motel and Hotel taxes suspended for 14 days beginning Sept. 8, 2008.
Thursday, August 14, 2008
Debt Relief Act of 2008
This law exclude from income any debt forgiven or cancelled as a result of modification of the terms of the mortgage, or foreclosure on your principal residence.
Usually, debt forgiven or cancelled by a lender must be included as income on your tax return as income. What the new law does for you? The new law allows you to exclude certain cancelled debt on your principal residence from income.
Do you need to report it on your ax return? Yes. As a general rule, must taxable and non taxable items are reportable events, and this one is reportable.
What about debt on a second home, credit card or car loans? Not contemplated under this provision. This provision applies to your principal residence. The law can be used for taxable years: 2007, 2008, and 2009.
Usually, debt forgiven or cancelled by a lender must be included as income on your tax return as income. What the new law does for you? The new law allows you to exclude certain cancelled debt on your principal residence from income.
Do you need to report it on your ax return? Yes. As a general rule, must taxable and non taxable items are reportable events, and this one is reportable.
What about debt on a second home, credit card or car loans? Not contemplated under this provision. This provision applies to your principal residence. The law can be used for taxable years: 2007, 2008, and 2009.
On Retirement
Penalty for early withdrawals from pension plans or IRAs prior to attain age 59 1/2. If you make withdrawal before attained the required age, you will be penalized 10% of the amount withdraw.
After tax IRA. If you have an after tax IRA, you need to keep track of your basis on the IRA by filing Form 8606. Why?. The IRS needs to know the after tax portion of your IRA, and so do you. You do not want to pay taxes a second time, Do you?
Rollover a 401K and/or a traditional IRA. Generally, do not result in a taxable transaction if is roller over within 60 days from the distribution date.
What is the date you should start receiving your minimum required distributions (MRD) payments after reaching 70 1/2? If you reach 70 1/2 in March 5, 2007 (or any date in 2007), you should begin making your 1st MRD by April 1, 2008 , and his/her second distribution by Dec. 31, 2007. VERY IMPORTANT. (Exceptions apply.)
After tax IRA. If you have an after tax IRA, you need to keep track of your basis on the IRA by filing Form 8606. Why?. The IRS needs to know the after tax portion of your IRA, and so do you. You do not want to pay taxes a second time, Do you?
Rollover a 401K and/or a traditional IRA. Generally, do not result in a taxable transaction if is roller over within 60 days from the distribution date.
What is the date you should start receiving your minimum required distributions (MRD) payments after reaching 70 1/2? If you reach 70 1/2 in March 5, 2007 (or any date in 2007), you should begin making your 1st MRD by April 1, 2008 , and his/her second distribution by Dec. 31, 2007. VERY IMPORTANT. (Exceptions apply.)
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