individual income tax 2009 update julie emanuele brad hungate kevin klein
Post on 02-Jan-2016
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Today’s PresentationToday’s Presentation
2009 Federal Update2009 Federal Update
Looking Forward: 2010 Federal ChangesLooking Forward: 2010 Federal Changes
2009 Virginia Update2009 Virginia Update
Looking Forward: 2010 Virginia ChangesLooking Forward: 2010 Virginia Changes
Elective Salary DeferralsElective Salary Deferrals
401(k) maximum elective deferral for 401(k) maximum elective deferral for 2009:2009:
– Under age 50: $16,500Under age 50: $16,500
– ““Catch up” contribution of $5,500 allowed if Catch up” contribution of $5,500 allowed if age 50 or olderage 50 or older
IRA ContributionsIRA Contributions
Maximum to a Traditional or Roth is $5,000Maximum to a Traditional or Roth is $5,000
Catch up contribution of $1,000 for Catch up contribution of $1,000 for taxpayers at least age 50 by the end of taxpayers at least age 50 by the end of 20092009
Have until due date of return (not including Have until due date of return (not including extension)extension)
Phase-out range of $89k-$109k for joint Phase-out range of $89k-$109k for joint filersfilers
Health Savings AccountsHealth Savings Accounts
Pay out-of-pocket medical expenses with Pay out-of-pocket medical expenses with pre-tax incomepre-tax income
Fund an HSA account with direct transfer Fund an HSA account with direct transfer from IRAfrom IRA
Maximum Contribution of $3,000 for single Maximum Contribution of $3,000 for single coverage ($5,950 for family coverage)coverage ($5,950 for family coverage)
If 55 or older, additional $1,000 catch-up If 55 or older, additional $1,000 catch-up contribution is availablecontribution is available
Higher Education ExpensesHigher Education Expenses
Extended through the Tax Extenders and Extended through the Tax Extenders and AMT Relief Act of 2008 through 2009AMT Relief Act of 2008 through 2009
Deduct up to $4,000 instead of Hope or Deduct up to $4,000 instead of Hope or Lifetime Learning tax creditsLifetime Learning tax credits
Subject to phase outSubject to phase out
Deduction taken on Form 8917Deduction taken on Form 8917
Education CreditsEducation CreditsAmerican Opportunity Tax CreditAmerican Opportunity Tax Credit
– Formerly known as Hope Scholarship creditFormerly known as Hope Scholarship credit– Maximum $2,500 credit perMaximum $2,500 credit per student student– First 4 years of undergraduate educationFirst 4 years of undergraduate education– Half time studentHalf time student– Phaseout begins at $80K for single filers ($160K for joint) Phaseout begins at $80K for single filers ($160K for joint)
and ends at $90K ($180K for joint)and ends at $90K ($180K for joint)
Lifetime Learning CreditLifetime Learning Credit– Maximum $2,000 credit per Maximum $2,000 credit per return– Available for unlimited number of years– Less than half time enrollment-non degree seeking
students– Phaseout begins at $50K for single filers ($100K for joint)
and ends at $60K ($120K for joint)
*Credit is taken on Form 8863
Qualified Educator ExpensesQualified Educator ExpensesAvailable for any Teacher, Instructor, Counselor, Available for any Teacher, Instructor, Counselor, Principal, or Aides teaching K-12 gradesPrincipal, or Aides teaching K-12 grades
Must work at least 900 hours during taxable yearMust work at least 900 hours during taxable year
Can deduct “above-the-line” up to $250 of Can deduct “above-the-line” up to $250 of expenses incurred for books and (non-athletic) expenses incurred for books and (non-athletic) suppliessupplies
Excess expenses of $250 can be deducted on Excess expenses of $250 can be deducted on Schedule A subject to 2% of AGISchedule A subject to 2% of AGI
Expires at end of 2009Expires at end of 2009
Sales & Use Tax DeductionSales & Use Tax Deduction
Available through 2009Available through 2009
Deduct either state income tax or sales Deduct either state income tax or sales and use taxand use tax
Use Receipts Method or Sales Tax TableUse Receipts Method or Sales Tax Table
Qualified Motor Vehicle TaxesQualified Motor Vehicle Taxes
For purchases on or after Feb. 17, 2009 For purchases on or after Feb. 17, 2009 and before Jan. 1, 2010and before Jan. 1, 2010
State or local sales or excise taxes can be State or local sales or excise taxes can be added to itemized or standard deductionadded to itemized or standard deduction
Only taxes on the portion of the vehicle not Only taxes on the portion of the vehicle not exceeding $49,500 may be deductedexceeding $49,500 may be deducted
Charitable Contribution Substantiation Charitable Contribution Substantiation
Some form of substantiation for charitable Some form of substantiation for charitable contributions must be retainedcontributions must be retained
Examples: Receipt, Letter Examples: Receipt, Letter from Charity, etc. from Charity, etc.
Deductions only available if taxpayer Deductions only available if taxpayer itemizes deductionsitemizes deductions
Distributions directly from IRA, expires in Distributions directly from IRA, expires in 2009 (discussed in more detail later)2009 (discussed in more detail later)
Residential Energy CreditsResidential Energy Credits
Nonbusiness Energy Property CreditNonbusiness Energy Property Credit– Credit equal to 30% of the cost of qualified Credit equal to 30% of the cost of qualified
energy efficiency improvements to principal energy efficiency improvements to principal residenceresidence
– Credit is limited to $1,500Credit is limited to $1,500– For property placed in service after 2008 and For property placed in service after 2008 and
before 2011before 2011
Kiddie TaxKiddie Tax
Now effects children ages 19-23 who are Now effects children ages 19-23 who are full time studentsfull time students
Earned income is less than half of supportEarned income is less than half of support
Investment income greater than $1,900Investment income greater than $1,900
2009 Capital Gains2009 Capital Gains
Capital gains that would have been taxed Capital gains that would have been taxed at 5% will not be taxed at allat 5% will not be taxed at all
Capital gains that would have been taxed Capital gains that would have been taxed at 15% will remain at 15%at 15% will remain at 15%
Will expire in 2010 when the 0% rates will Will expire in 2010 when the 0% rates will go to 10% and 15% rates will go to 20%go to 10% and 15% rates will go to 20%
Excluded Combat PayExcluded Combat Pay
Can elect to have excluded combat pay Can elect to have excluded combat pay count as earned income in the calculation count as earned income in the calculation for the earned income tax creditfor the earned income tax credit
Counts towards “compensation” for IRA Counts towards “compensation” for IRA contribution limitations & Making Work Pay contribution limitations & Making Work Pay Credit (discussed later)Credit (discussed later)
Roth IRA ConversionsRoth IRA Conversions
Limit on modified adjusted gross income of Limit on modified adjusted gross income of $100,000 lifted for all taxpayers beginning in $100,000 lifted for all taxpayers beginning in 20102010
Convert all or any portion of a Traditional, Convert all or any portion of a Traditional, SEP, or SIMPLE IRA into a Roth IRA during SEP, or SIMPLE IRA into a Roth IRA during 20102010
Retain option to recharacterize conversion Retain option to recharacterize conversion until due date of return (including extensions) until due date of return (including extensions)
Roth IRA ConversionsRoth IRA ConversionsElect to defer taxes on conversion until 2011 Elect to defer taxes on conversion until 2011 & 2012 (only available for conversions in & 2012 (only available for conversions in 2010) 2010)
Possible Benefits from ConvertingPossible Benefits from Converting– Enjoy Tax-Free Distributions in RetirementEnjoy Tax-Free Distributions in Retirement– Benefit from Tax-Free Earnings GrowthBenefit from Tax-Free Earnings Growth– Manage Personal Income Tax ImplicationsManage Personal Income Tax Implications– Take Advantage of Perfect 20/20 Hindsight with Take Advantage of Perfect 20/20 Hindsight with
Roth IRA Recharacterizations Roth IRA Recharacterizations
Making Work Pay CreditMaking Work Pay Credit
Enacted by the 2009 Recovery Act Enacted by the 2009 Recovery Act
Available for eligible taxpayers in 2009 & Available for eligible taxpayers in 2009 & 20102010
Refundable credit equal to lesser of: Refundable credit equal to lesser of: – 6.2% of taxpayer’s earned income6.2% of taxpayer’s earned income– $400 per individual ($800 married couples)$400 per individual ($800 married couples)
Begins phase out at $75,000 ($150,000 for Begins phase out at $75,000 ($150,000 for MFJ) in modified adjusted gross incomeMFJ) in modified adjusted gross income
First-Time Homebuyer CreditFirst-Time Homebuyer Credit
Extended until April 30Extended until April 30thth, 2010 (or until , 2010 (or until June 30June 30thth, 2010 if binding contract agreed , 2010 if binding contract agreed to before May 1to before May 1stst, 2010) , 2010)
First-Time Homebuyers - Tax credit up to First-Time Homebuyers - Tax credit up to lesser of $8,000 or 10% of purchase pricelesser of $8,000 or 10% of purchase price
Long-Time Residents – Tax credit up to Long-Time Residents – Tax credit up to lesser of $6,500 or 10% of purchase pricelesser of $6,500 or 10% of purchase price
First-Time Homebuyer CreditFirst-Time Homebuyer Credit
Credit phased out when MAGI falls Credit phased out when MAGI falls between the following income levels between the following income levels (completely phased out at highest level)(completely phased out at highest level)– Single - $75,000 - $95,000Single - $75,000 - $95,000– Married filing Joint - $150,000 - $170,000Married filing Joint - $150,000 - $170,000
No credit for purchases exceeding No credit for purchases exceeding $800,000 – no phase out available here$800,000 – no phase out available here
Refundable, but also can be Recaptured Refundable, but also can be Recaptured
Standard DeductionStandard Deduction2009 Applicable Standard Deduction: 2009 Applicable Standard Deduction: – Single - $5,700Single - $5,700– HOH - $8,350HOH - $8,350– Joint (or surviving spouse) - $11,400Joint (or surviving spouse) - $11,400
Real Estate Taxes:Real Estate Taxes:– Single – up to $500Single – up to $500– Joint – up to $1,000Joint – up to $1,000
Vehicle Sales Taxes – can also include Vehicle Sales Taxes – can also include sales tax paid on qualified motor vehiclesales tax paid on qualified motor vehicle
Unemployment CompensationUnemployment Compensation
Federal Law – Can exclude up to $2,400 Federal Law – Can exclude up to $2,400 of unemployment compensation benefits of unemployment compensation benefits received during 2009 from taxable incomereceived during 2009 from taxable income
Virginia Law – Can exclude all unemploy-Virginia Law – Can exclude all unemploy-ment compensation benefits received ment compensation benefits received during 2009 year from taxable incomeduring 2009 year from taxable income
COBRA SubsidyCOBRA Subsidy
Provides a 65% subsidy for COBRA Provides a 65% subsidy for COBRA continuation premiums for up to 9 monthscontinuation premiums for up to 9 months
Applies to workers who have been Applies to workers who have been involuntarily terminated between Sept. 1, involuntarily terminated between Sept. 1, 2008 and Dec. 31, 20092008 and Dec. 31, 2009
Taxable income for year cannot exceed Taxable income for year cannot exceed $125,000 (single) or $250,000 (joint)$125,000 (single) or $250,000 (joint)
Subsidy is non-taxableSubsidy is non-taxable
Job Hunting ExpensesJob Hunting ExpensesExpenses incurred searching for new Expenses incurred searching for new employment in same trade or business are employment in same trade or business are deductible as miscellaneous itemized deductible as miscellaneous itemized deductions subject to 2% limitationdeductions subject to 2% limitation
Examples:Examples:– Employment Agency FeesEmployment Agency Fees– Resume Preparation ServicesResume Preparation Services– Travel & Transportation Fees (Unreimbursed)Travel & Transportation Fees (Unreimbursed)– Employment CounselingEmployment Counseling
Looking forward: 2010Looking forward: 2010
Elective deferrals contribution limits will Elective deferrals contribution limits will remain the same as 2009remain the same as 2009
IRA contributions will remain the same as IRA contributions will remain the same as 20092009
Expiring adjustments, credits, and Expiring adjustments, credits, and deductionsdeductions
Proposed Proposed Congressional LegislationCongressional Legislation
Health Care?Health Care?
Estate Tax?Estate Tax?
Another Stimulus Measure?Another Stimulus Measure?
Jobs Bill?Jobs Bill?
Virginia UpdateVirginia Update
Tax Relief for Military SpousesTax Relief for Military Spouses
Virginia Sales Tax HolidaysVirginia Sales Tax Holidays
Certain Virginia Deductions and Tax CreditsCertain Virginia Deductions and Tax Credits
Looking Forward: 2010 & BeyondLooking Forward: 2010 & Beyond
Tax Relief for Spouses Tax Relief for Spouses of Military Personnelof Military Personnel
Federal legislation signed on November 11, Federal legislation signed on November 11, 2009 - Military Spouses Relief Act2009 - Military Spouses Relief Act
Effective – Taxable Year 2009Effective – Taxable Year 2009
Spouses do not automatically become Virginia Spouses do not automatically become Virginia residentsresidents
Spouses may be eligible for refund of employer Spouses may be eligible for refund of employer withholdingwithholding
Virginia Sales Tax HolidaysVirginia Sales Tax Holidays
May 24-30, 2010 – Hurricane Preparedness May 24-30, 2010 – Hurricane Preparedness EquipmentEquipment
August 6-8, 2010 – School Supplies, August 6-8, 2010 – School Supplies, Clothing & Footwear Clothing & Footwear
October 8-11, 2010 – Energy Star Qualified October 8-11, 2010 – Energy Star Qualified ProductsProducts
Virginia Deduction for Income from Virginia Deduction for Income from Dealer Disposition of Real PropertyDealer Disposition of Real Property
For 2009, qualifying individuals and corporations For 2009, qualifying individuals and corporations can defer payment of a portion of VA income tax can defer payment of a portion of VA income tax incurred from the sale of real property provided:incurred from the sale of real property provided:– The sale occurs on or after 1/1/09The sale occurs on or after 1/1/09– Property sold is real estateProperty sold is real estate– Taxpayer reports entire gain as income on the federal Taxpayer reports entire gain as income on the federal
returnreturn
Virginia Livable Home CreditVirginia Livable Home Credit
Credit for supplies purchased and other items Credit for supplies purchased and other items needed to retrofit existing residences with needed to retrofit existing residences with accessibility and/or visitability featuresaccessibility and/or visitability features
Also applies to supplies needed to Also applies to supplies needed to incorporate features into new constructionincorporate features into new construction
Limited to $1,000/taxable year for 2009Limited to $1,000/taxable year for 2009
For 2010, maximum amount is $2,000For 2010, maximum amount is $2,000
Federal and State Salary Subtraction
Only individuals earning less than $15,000 in wages are entitled to subtraction
Effective For: Employees of state-supported universities, colleges, and community colleges and other state and federal agencies
Not Effective For: Employees of Local Government, U.S. Postal Service, Army, Navy, Air Force, Marines, and National Guard
Land Preservation Tax Credit
For 2009 and 2010, amount of credit that can be claimed has been reduced to $50,000 per taxpayer
Carryover period for unused credits is extended 2 years for affected taxpayers
College Savings PlansCollege Savings Plans
Effective 2009, allowable deduction for Effective 2009, allowable deduction for contributions will increase to $4,000 per plan or contributions will increase to $4,000 per plan or accountaccount
There are currently no restrictions on deduction There are currently no restrictions on deduction amounts for individuals who are 70 or olderamounts for individuals who are 70 or older
Household EmployersHousehold Employers
Household employers may now elect to Household employers may now elect to file and pay household Virginia file and pay household Virginia employment taxes annuallyemployment taxes annually
Virginia Tax Department Virginia Tax Department ServicesServices
e-Subscriptionse-Subscriptions– Customized e-mails on a variety of state tax topicsCustomized e-mails on a variety of state tax topics
Live ChatLive Chat– Available weekdays from 7a.m. to 9 p.m. and 8 a.m. to 1 p.m. on Available weekdays from 7a.m. to 9 p.m. and 8 a.m. to 1 p.m. on
SaturdaysSaturdays
Looking ForwardLooking Forward
Increase in the filing threshold in VirginiaIncrease in the filing threshold in Virginia
Filing Status 2010 & 2011 2012 & Beyond
Single or MFS $11,650 $11,950
MFJ $23,300 $23,900
SummarySummary
2009 Federal Updates2009 Federal Updates
Looking Forward: 2010 Federal ChangesLooking Forward: 2010 Federal Changes
2009 Virginia Updates2009 Virginia Updates
Looking Forward: 2010 Virginia ChangesLooking Forward: 2010 Virginia Changes
QuestionsQuestionsJulie EmanueleJulie Emanuele– Phone: 804-433-1084Phone: 804-433-1084– Email: Email: jemanuele@theroselinegroup.com
Brad HungateBrad Hungate– Phone: 804-545-7458Phone: 804-545-7458– Email: Email: bhungate@theroselinegroup.com
Kevin KleinKevin Klein– Phone: 804-545-7459Phone: 804-545-7459– Email: Email: kklein@theroselinegroup.com
www.theroselinegroup.comwww.theroselinegroup.com
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