2009 End of Year Tax Tips

With less than nine weeks left until 2010, it makes sense to look at your personal and business tax situation and to know what tax easings set to expire in 2009 or delay action until new rules take effect in 2010. No one enjoys a larger tax bill in April only to find out that if action had been taken prior to December 31, hundreds or thousands of dollars could have been saved.

Most taxpayers benefit by accelerating tax deductions from 2010 into 2009 and deferring income until 2010 unless they expect to be in a higher tax bracket in 2010. Income tax rates are not expected to change in 2010.

First time home buyers won’t have to act by Nov. 30 to get a tax credit. Congress will extend the $8,000 credit for several months, well into 2010. Prospective buyers who already own a home should wait a brief time to buy because Congress is working on a bill that will give a $6,500 credit to buyers who’ve owned a home for 5 of the last 8 years.

If you are considering buying a new vehicle, it may be better to purchase by December 31, 2009. The deduction of sales tax on up to $49,500 of the cost of new vehicles for those who do not itemize their deductions is set to expire December 31, 2009 and is not expected to be extended.

If you have considered converting your IRA to a Roth, wait until 2010. Beginning in 2010 the tax on the conversion can be spread out over two years. Additionally, the ban on conversion for high incomers goes away.

Retirement plan distributions for those over 70 ½ are not required for 2009 but will be required again in 2010.

If you are an employee and also operate a side business, or have considerable other income you may want to consider increasing your employee withholding until December 31 to cover any tax shortfall thereby eliminating any underestimating tax penalty.

You should consult a qualified tax professional before making any decision.

Ron Dubois is a CPA licensed in both the states of Tennessee and Florida with offices in Brentwood, TN and Rockledge, FL www.ronduboiscpa.com 615-274-4203