It’s tax time. Do you know where your last-minute deductions are? You’d better find them now, because many of them will disappear when tax laws change in 2010. We asked a couple of local tax experts where those elusive deductions might be hiding.
JONATHAN BECKER, Becker and rosen CPAs
If eligible, set up a SEP. That stands for Self-Employed Pension Plan. “You can contribute as much as $49,000 at the last minute—and, if you can’t come up with the cash by April 15, you can actually extend your return until October without penalties or interest,” Becker says. You still have to pay your taxes by the 15th, he explains, but, to encourage SEP contributions, the government gives you a six-month grace period on filing your return. “IRA contributions are another possible last-minute deduction, but you can’t file an extension for them,” Becker says.
Break for Retirees. “As a result of the market crash, many older Americans didn’t have to take an IRA distribution in 2009—it was the government’s way of helping them rebuild depleted finances,” Becker says. “But you’ll have to take a distribution in 2010, so change your estimates to cover your RMD, required minimum distributions.”
Go green, get green. “Take advantage of the substantial, $1,500 energy credit that’s available,” Becker says. “To claim it, you need to make an energy improvement to your home, but it doesn’t have to be anything elaborate. If you’ve added insulation, weather stripping, energy-efficient window treatments, double-paned glass, whatever, you may be eligible.”
Check your paycheck. “Don’t forget to claim the ‘Making Work Pay’ credit, if you’re eligible,” Becker says. “It’s an $800 credit related to the change in withholding tables in 2009, part of President Obama’s plan to kick-start the economy.”
MAURICE QUIROGA, PNC WEALTH MANAGEMENT
Sweet charity. “Charitable donations to Haiti relief made after Jan. 11 and before March 1 can be treated as a 2009 contribution,” Quiroga says. “It’s an added incentive to help those in need.”
Home sweet home. Time is running out to take advantage of the first-time homebuyer tax credit,” Quiroga notes. “You may be eligible for up to $8,000. If you’re not a first-time buyer but you’ve lived in your current home five years or more, you can still get a credit for $6,500, unless your adjusted gross income is more than a certain amount or your home’s purchase price was over $800,000.”
The college try. “Above-the-line deductions for qualified tuition and related expenses have expired, but you can still get a maximum of $4,000 for those expenses for 2009,” Quiroga says.
Vroom, vroom. “Put in place last year as part of the American Recovery & Reinvestment Act is the option of deducting sales and excise taxes on new vehicle purchases of $49,000 or less,” Quiroga points out. “There are limitations; check with your tax adviser.”
High-net safety net. “High-net-worth taxpayers should be aware of alternative minimum tax planning, a separate federal income tax system with its own rates and rules,” Quiroga explains. Generally, the AMT system has a broader definition of taxable income, a larger exemption and lower tax rates. “Your ability to get higher deductions ends in 2009, so be sure to utilize those AMT limits while you can,” he adds.