Sunsetting Tax Deductions

Get them before they burn out!-Tax Deductions that will be sun setting by the end of this year.

To address the budget deficit and other matters, Congress is has been enacting more tax law provisions on a temporary basis. Some become permanent, such as, the Work Opportunity Tax Credit,  while others will be allowed to fade into the sunset. Here is a list  of the fading tax saving opportunities for income taxpayers for 2009.

Here is a list  of the fading tax saving opportunities for income taxpayers for 2009.

1. Unemployment Income. Up to $2,400 of unemployment compensation is excluded from the gross income of the recipient. However, this exclusion will not be available for benefits received in tax years beginning after 12/31/2009 [IRC Sec. 85(c)].
2. Sales/Excise Tax Deductions. You can claim a deduction (whether you itemize or claim the standard deduction) for sales or excises taxes paid on the purchase of a new vehicle. The deduction (phased out at higher income levels) does not apply to purchases after December 31, 2009 [IRC Sec. 164(b)(6)(G)]. 
3. Personal Property Tax Deductions. If you claim the standard deduction, take an additional deduction for state and local property taxes, up to a maximum of $500 ($1,000 for joint return filers). The deduction is not available for tax years beginning after 2009 [IRC Sec. 63(c)(7)].
4. Sales Tax deductions. You can elect to take an itemized deduction for state and local general sales taxes instead of an itemized deduction for state and local income taxes, but the election is available only for tax years beginning before Jan. 1, 2010 [IRC Sec. 164(b)(5)(I)].
5. Tuition Expense(S) Deductions. You can claim an above-the-line deduction for "qualified tuition and related expenses" paid for the enrollment or attendance of yourself, your spouse or a dependent at an eligible institution of higher education. The deduction cannot exceed $4,000 (phased out at higher income levels) and applies only to tax years beginning before January 1, 2010 [IRC Sec. 222(e)].
6. Conservation Contribution Deduction(S). The maximum deduction allowed annually for charitable donations is increased in the case of "qualified conservation contributions." The increased deduction is not available for donations after December 31, 2009 [IRC Sec. 170(b)(1)(E)].
7. First-Time Homebuyer Credit Tax Credits. You can claim a first-time homebuyer credit of up to $8,000 (subject to phase out at higher income levels) for the purchase of a principal residence in 2009. The credit can be claimed only for homes purchased before December 1, 2009. [IRC Sec. 36].
8. Alternative Minimum Tax (AMT) Off-Sets. You can offset nonrefundable personal tax credits, such as the child and dependent care credit and the Lifetime Learning credit, against their alternative minimum liability. The offset will not be available for tax years beginning after 2009 [IRC Sec. 26(a)(2)].
9. Alternative Minimum Tax Exemption Reduction. In 2010, the exemption amounts used in calculating a client's alternative minimum taxable income of $70,950 for married filing a joint return and $46,700 for single and head of household are scheduled to drop to $45,000 and $33,750, respectively [IRC Sec. 55(d)(1)].
10. COBRA Employee Benefits. If you are covered by employer-sponsored health plans and are terminated before January 1, 2010, you can qualify for subsidized plan continuation (COBRA) coverage for up to nine months. Employers can claim a credit against employment taxes for the subsidies provided to employees [IRC Sec. 6432].   
11. Bonus Depreciation Deductions. You can claim an additional 50% Bonus depreciation allowance for qualifying business machinery and equipment placed in service before in 2009 [IRC Sec. 168(k)(2)(A)].
12. Section 179 Business Deductions. You can claim a Section 179 expensing deduction for the first $250,000 of qualifying equipment and machinery placed in service during this year, subject to a phase out if more than $800,000 of eligible property is placed in service during the year. For tax years beginning after December 31, 2009, the maximum Section 179 deduction drops to $125,000 with the phase-out starting at the $500,000 capital acquisition level [IRC Sec. 179(b)(7)].
13. Leasehold Improvements Deductions. The cost of qualified leasehold improvement property, restaurant property, and retail space improvement property can be written off over 15 years. The 15-year write-off period is not available for property placed in service after December 31, 2009.[IRC Sec. 168(e)(3)(E)].

Farm Equipment Deductions. Certain qualifying machinery and equipment used in a farming business may be written off over a five-year cost recovery period. The original use of the property must begin with the taxpayer and the property must be placed in service before January 1, 2010 [IRC Sec. 168(e)(3)(B)].

Military Pay Tax Credits. Employers may claim a 20% income tax credit for qualifying differential pay paid to employees on active military duty. The credit expires for payments made after December 31, 2009 [IRC Sec. 45P].

New Home Contractors Tax Credit. Eligible contractors may claim a credit of up to $2,000 for each qualified new energy efficient home that the contractor constructs and that is acquired from the contractor for use as a residence. The credit applies to homes built  and sold before December 31, 2009 [IRC Sec. 45L].

For more information on this article, please contact us  at 703-437-8877 or at info@millermusmar.com.