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Date last modified: 01/11/10
 

August 2009

Summer is speeding by faster than we like! With Congress on summer recess, this is a good time to review some of the tax legislation passed this year.

First-Time Homebuyer Credit

This credit is designed to encourage people to buy their first home. Last spring, the credit was increased from $7,500 and the pay-back provision eliminated! Qualifying homebuyers may be eligible for up to an $8,000 refundable tax credit, based on the purchase price of the home. To claim the credit, the purchase transaction must close on or after 1 January 2009 and before 1 December 2009. A homebuyer is considered "first-time" if he or she (and the spouse, if married) has not owned a principal residence during the three years prior to purchase closing date.

The credit can be taken on an amended 2008 tax return or on the 2009 tax return. If the home is sold within three years of purchase, the entire credit will be "recaptured", meaning it will have to be paid back to the government. Other provisions apply to cover unmarried persons buying a home together, buying a home from a closely related party and building a qualifying home. Vacation and rental home purchases do not qualify for the credit. Contact our office for more information.

Unemployment Benefits

The first $2,400 of unemployment benefits received in 2009 will be exempt from federal income tax. If both the taxpayer and spouse received unemployment during 2009, both will qualify for this benefit. Oregon is also going along with the exemption. Unemployment is considered taxable income and is reported on a 1099-G.

Energy Credits for Home Improvements

The federal government reintroduced residential energy credits for certain efficiency improvements made between 17 February 2009 and 31 December 2010. Improvements include adding insulation, roofing, water heaters, energy efficient exterior windows and energy-efficient heating and air conditioning systems to your home. The non-refundable tax credit is 30% of the product cost (installation and labor are not included the credit calculation) up to a maximum $1,500 credit for all improvements made during the qualifying period. Do your homework before beginning your improvement project. All improvements must meet specific efficiency standards and some may require installation by approved vendors. More information is available at the Energy Star website.

 

Special Sales Tax Deduction

For 2009 only, taxpayers can deduct state and local sales and excise taxes paid on the purchase of a new automobile, light truck, motor home or motorcycle, bought after 16 February 2009 and before 1 January 2010. The deduction is available to taxpayers who itemize their deductions, as well as those who take the standard deduction. The deduction is limited to taxes paid on the first $49,500 of vehicle cost. The deduction phases out for singles with adjusted gross income above $125,000 and married filing joint, over $250,000. Oregon residents who pay tax-like fees on the purchase of a new vehicle qualify for this tax break. If you bought a new vehicle during the specified time period, bring your purchase contract in with your tax materials, next year.

Cash for Clunkers and Taxes

You do not have to claim the credit for trading in a "clunker" on your income tax. If, however, you are trading in and/or acquiring a vehicle for business purposes, the credit may impact the business deduction calculation. The vehicle you buy may also qualify for a state and/or federal hybrid vehicle credit. See our website for more information: www.mrbilltaxman.com/EnergyCredits.htm

Court Awards and Damages

Generally, most court awards, damages and other settlements are taxable income to the recipient. Awards and settlements for physical injuries and physical sickness are usually non-taxable. If you receive a court award, please include information about the final settlement in your tax papers. Award amounts might be reported on a 1099-Misc.

Oregon Tax Changes

  • The Oregon Legislature passed the following, scheduled to start with the 2009 tax year; subject to an election in January 2010:

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  • For 2009-2011, 10.8% will be the maximum state tax rate for single taxpayers with Oregon taxable incomes of $125,000 - $250,000; married filing joint $250,000 - $500,000; the rate drops to 9.9% 1 January 2012.

  • The tax rate for those with Oregon taxable incomes over $250,000 for single filers and over $500,000 for joint filers will be 11%.

  • The federal tax subtraction will be subjected to a phase-out for higher income taxpayers.

  • S-Corps will pay a minimum tax of $150 (up from $10). Partnerships will now have to pay $150 with their tax return filing.

  • C-Corp tax will be $150 - $100,000 based on gross sales in Oregon.

  • Oregon’s tax credit for purchasing a hybrid vehicle will be terminated 1 January 2010.

Oregon Tax Amnesty Program

Taxpayers, who have not filed Oregon returns for tax years prior to 2008, may be eligible to participate in the state’s amnesty program. However, if Oregon has sent a "Letter of Deficiency" or other billings, you do not qualify for the program. There won’t be much time to act. Eligible returns must be filed between 1 October and 19 November 2009. All penalties and 50% of the interest due will be waived, but 25% of the total amount of unpaid tax will be added to the total owed. Contact Bill if you have questions.