Year End Tax Information – 2009

1.        The estate tax was supposed to end for estate of decedents dying in 2010 but that appears unlikely.

2.       Although not final at this date, it appears the estate tax in force at the current exemption level of $3.5 million will be in effect for 2010.

3.       Annual exclusion gifts ($13,000/individual/donor in 2009) shouldn’t be postponed until year end.  If such gifts are made at the beginning of each year, their appreciation in value inures to the done that much sooner.

4.       An employee that discovers that 2009 withholding is under for whatever reason, such as gains on stock sales, may have additional withholding taken out of the last payroll period.  The adjustment would help avoid under payment of tax penalties as W2 withholdings are treated as having been paid on each quarter.

5.       Deplete health FSA accounts before year end. IRS has allowed employers to provide an additional 2 ½ month grace period in which employees can incur expenses and still obtain reimbursements of the amounts.  Employer reimbursements of amounts paid for non prescription drugs (i.e., “over –the-counter”)are  considered expenditures for medical care and thus qualify for reimbursements, even though amounts paid for over-the-counter drugs are not deductible on Schedule A.

6.       By purchasing a car before the end of 2009, the taxpayer can both deduct sales tax on a qualifying motor vehicle purchase AND get an itemized deduction for state and local income taxes.

7.       In addition to obtaining a sales tax deduction, a taxpayer can claim a tax credit if before the year’s end a new environmentally friendly car is purchased or place in service.

8.       Purchase energy saving home improvements before year’s end.

9.       The Tax Extenders Act of 2009(thru 2010)

·         Extension of the deduction of State and local general sales taxes.

·         Extension of the additional standard deduction for real property taxes

·         Extension of the above-the-line deduction for qualified tuition and related expenses.

·         Extension of the above-the-line deduction for certain expenses of elementary and secondary school teachers.

·         Extension of provision encouraging contributions of capital gain real property for conservation purposes.

·         Extension of tax-free distributions from individual retirement plans for charitable purposes.

·         Extension of special rule for S Corporations making charitable contributions of property, allowing a shareholder their pro rata share of charitable deductions even if such deductions would exceed such shareholder’s adjusted basis in the S corporation.

10.   Mileage rates decrease for 2010

·         50 cents per mile for business travel after 2009

·         Medical and moving mileage expense deduction down to 16.5 cents per mile.