Tax Tips Elaine Norton, CPA, CSEP, Manager | Silver Lining for Homeowners, Workers and Small Business?The Worker, Homeownership and Business Assistance Act of 2009, signed into law on November 6th, extends two popular tax breaks – the first-time homebuyer credit and the expanded net operating loss (NOL) carryback.
First-time homebuyer credit. Scheduled to expire on November 30, 2009, this credit (10% of the purchase price up to $8,000) for principal residences purchased by first-time buyers has been extended to include purchases taking place on or before April 30, 2010. In fact, those who enter a binding contract by that date and close on the purchase by June 30, 2010 will be able to claim the credit. Members of the military may have additional time if they are serving on qualified official extended duty outside of the U.S. An added perk – you can elect to treat a qualifying purchase as made on December 31 and claim the credit on your 2009 return.
No longer limited to first-time homebuyers, a reduced credit of $6,500 is available to those who have owned and used the same residence as the principal residence for any five consecutive year period during the eight years ending on the date of the purchase of a subsequent principal residence. This provision is intended to help younger homeowners who are trading up and seniors who are looking to downsize. Congress also raised the income phase-outs for the credit. There are several complexities to the new act. Call us for details. NOL carryback. In what is very welcome news for many businesses buffeted by the recession, the new law not only extends special NOL carryback rules, it makes all businesses eligible for the expanded carryback first made available under the 2009 Recovery Act. The normal carryback is two years; the new law allows up to a five year carryback of NOLs. A taxpayer can take the new expanded election in either 2008 or 2009, but not for both years. A 50% limitation applies in the fifth year. There is a special rule for a qualified small business that elected under the 2009 Recovery Act to carry back 2008 NOLs: it may make the election for an additional year, and the 50% limitation does not apply.
Other opportunities to note before they disappear:
Nonbusiness Energy Property Credit – The 2009 Recovery Act increased the credit rate to 30% of the cost of all qualifying improvements and raised the credit limit to $1,500 for 2009 and 2010 combined. Qualifying improvements must be made to the taxpayer's principal residence in 2009 or 2010, and include adding insulation, energy-efficient exterior windows and heating and air conditioning systems. Written manufacturer certification is required and the credit must be claimed on the tax return for the year that the improvements are made using Form 5695, Residential Energy Credits.
IRA Required Minimum Distributions – Remember that the required minimum distribution from individual retirement accounts has been waived for 2009 only. Bonus Depreciation & Enhanced Sec. 179 Expense – In the 2008 Stimulus Act, Congress enacted 50% additional first-year bonus depreciation, and extended it through December 31, 2009 in the 2009 Recovery Act. The taxpayer deducts 50 percent of the property's basis in the first year, before reducing the basis for normal depreciation computed over the property's recovery period, including the first year. Bonus depreciation is available for new property with a recovery period of 20 years or less, water utility property, off-the-shelf computer software, and qualified leasehold property. While this can be a very large deduction, care must be exercised when planning whether to utilize these extra deductions. With the national deficit at an all time high, it is to be expected that income tax rates are going to increase to pay for new programs and to lower the deficit. Please communicate with us before you make decisions to utilize bonus depreciation and the high 179 expense deduction. Contact Elaine at Elaine_Norton@mnccpa.com.
Note: The information in this article is meant to raise awareness of the topic addressed and should not be considered tax advice. It is always important to consult a tax planner prior to engaging in actions that may have tax consequences. |  |
