Displaying items by tag: tax deductibles

People who weatherize their homes or purchase alternative energy equipment may qualify for either of two expanded home energy tax credits: the non-business energy property credit and the residential energy efficient property credit.

• Non-business Energy Property Credit: This credit equals 30 percent spent on eligible energy saving improvements, up to a maximum credit of $1,500 for the combined 2009 and 2010 tax years. The improvements must be made to an existing principal residence – not new construction. The cost of certain high-efficiency heating and air conditioning systems, water heaters and stoves qualify, along with labor costs for installing them. In addition, the cost of energy efficient windows, skylights and doors, qualifying insulation, and certain roofs qualify, though the cost of installing them do not.
• Residential Energy Efficient Property Credit: This credit equals 30 percent spent on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property. Qualifying property purchased for new construction or an existing home is eligible. And labor costs are generally included. Also, no cap exists on the amount of credit available except in the case of fuel cell property.

Not all energy efficient improvements qualify, so check the manufacturer’s tax credit certification statement carefully. The statement can usually be found on the manufacturer’s Web site or the product packaging. The IRS cautions that the manufacturer’s certification is different from the Department of Energy’s Energy Star label, and not all Energy Star labeled products qualify for the tax credits.

Following along the theme of my last blog, here are some more tax deductions, credits, and incentives for your 2009 tax returns.You may also find it helpful to download our tax organizer for 2009.

New Vehicle Purchase Incentive. New car buyers can deduct state or local sales or excise taxes paid on the purchase of new cars, light trucks, motor homes and motorcycles. The deduction is limited to the tax on up to $49,500 of the purchase price of each qualifying new vehicle purchased after Feb. 16, 2009, and before Jan. 1, 2010, and is subject to income phaseouts based on filing status. Individuals who itemize and those who take the standard deduction can benefit. In states without a sales tax, other taxes or fees can qualify if they are assessed on the purchase of the vehicle and are based on the vehicle’s sales price or as a per unit fee.

Cash for Clunkers A $3,500 or $4,500 voucher or payment made for such a voucher under the CARS “cash for clunkers” program is not taxable to the consumer buying or leasing a new car.

Tax Credits Increased for Low and Moderate Income Workers. The Earned Income Tax Credit (EITC) is now available for those with three or more qualifying children and married couples. The EITC helps taxpayers whose incomes are below certain income thresholds. The EITC, which, unlike most tax breaks, is refundable, meaning that individuals can get it even if they owe no tax and even if no tax is withheld from their paychecks.

Standard Deduction Increases for Most Tax-payers. Nearly two out of three taxpayers choose to take the standard deduction rather than itemizing deductions such as mortgage interest and charitable contributions. Eligible taxpayers can further increase their standard deduction by state or local real estate taxes paid in 2009, a net disaster loss reported, and state or local sales or excise taxes on the purchase of a qualifying new motor vehicle.

Making Work Pay Credit. Many taxpayers will qualify for the maximum credit of $800 for joint return filers ($400 for others). The credit equals 6.2 percent of earned income up to the maximum amount. For most, the credit is based on the taxable wages reported on Forms W-2. Self-employed individuals figure the credit using net profit or loss. Additional calculations apply to some taxpayers, including those with net business losses or foreign earned income. Not everyone is eligible, such as those whose income is above certain thresholds, those without valid Social Security numbers, and nonresident aliens. A reduced credit applies to those who received a $250 economic recovery payment made in 2009, and who claim the government retiree credit.

Although all eligible taxpayers must file Schedule M to claim the credit, most got the benefit of this credit through larger paychecks, reflecting reduced federal income tax with-holding during 2009. However, since the adjustments to the withholding tables may have caused millions of taxpayers to be under withheld, IRS will waive the penalty for an under payment of personal income tax caused by adjustments made to the income tax withholding tables after enactment of the Making Work Pay Credit.

Government Retiree Credit. This credit is designed to provide a benefit equivalent to the economic recovery payment to those government retirees who did not qualify for these payments. Retired federal, state or local government employees who receive pensions in 2009, based on work not covered by Social Security, are eligible to claim this credit. The credit is $250. The credit can’t be claimed by anyone who received the $250 economic recovery payment during 2009.

When my wife owned her own business as a wholesale distributor. She also was a full time mom. She had a huge van to accommodate kids and business. The title of the car was in her name so she had to keep a mileage log for reimbursement purposes. After a while the business grew enough where she needed a larger full time van in the business name. But to her disappointment, she still needed to keep track of the business usage.

If your company is paying for a car, make sure you title it in the company’s name. If the company writes the check yet you put the title in your own name, the IRS is almost surely going to deny the business a depreciation deduction.

This doesn’t apply to sole proprietors; you and your business aren’t separate entities. Your company may also lose deductions for insurance, gas, maintenance, etc. Of course, even if the car is in the company’s name, you still have to keep records of the business usage. But if you don’t take the first step, you’ll have an uphill battle. By the way, the same will likely be true for other business assets.

Understanding tax rules can be daunting. Not only do they change often, they have even been known to change in a single tax season. In other words, after you receive your W2 forms and before the April 15th deadline. So here is a little tip for understanding what vehicles qualify when they are used for business or non-personal use.

Annual depreciation limits apply to autos and trucks, but some special vehicles are exempt such as qualified non-personal use vehicles, which by their nature are not likely to be used more than a minimal amount for personal purposes. If your truck or van has been specially modified in ways that limit personal use – by the installation of permanent shelving, for example – annual limits will not apply. Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat are also qualified non-personal use vehicles.

As always, if you have any questions you should ask an accounting professional, preferably a Certified Public Accountant. Remember that in order for CPA’s to maintain their certification they must take continuing education credits to stay on top of tax laws.

Recently signed into law, the “Hiring Incentives to Restore Employment Act of 2010” (the HIRE Act), includes several provisions of extreme importance to many businesses. If you would like more details about these provisions or any other aspect of the new law, please do not hesitate to contact our Padgett accounting office.

Payroll tax holiday and up to $1,000 credit for employers who hire unemployed workers. To help stimulate the hiring of workers by the private sector, the new law exempts any private sector employer that hires a worker who had been unemployed for at least 60 days from having to pay the employer’s 6.2% share of the Social Security payroll tax on that employee for the remainder of 2010. As an additional incentive, the employer is eligible for an additional nonrefundable tax credit of up to $1,000 for any qualifying worker hired under this initiative that is kept on payroll for a continuous 52 weeks. In order to be eligible, the employee’s pay in the second 26 week period must be at least 80% of the pay in the first 26 week period.

Workers hired after Feb. 3, 2010 are eligible for the payroll tax forgiveness and the retention bonus, but only wages paid after March 18 receive the exemption for payroll taxes. Restrictions do apply, so check the law carefully. For example: these tax breaks do not apply to hiring family members.

Extension of enhanced small business expensing. The new law gives a one year extension on enhanced expensing rules, which allow qualifying businesses the option to currently deduct the cost of business machinery and equipment, instead of recovering it via depreciation over a number of years. For tax years beginning in 2010, the maximum amount that a business may expense is $250,000, and the expensing election begins to phase out when a business buys more than $800,000 of expensing eligible assets. These dollar limits are the same as those that were in effect for 2008 and 2009.