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Wednesday, December 23, 2009
Homebuyer credit renewed and expanded
In the hopes of sustaining the real estate market's recent momentum, Uncle Sam has made more than two-thirds of current homeowners, and nearly all first-time buyers, eligible for thousands of dollars in tax breaks when a house is purchased.
Credit for homebuyers
While the value of the credit remains as high as $8,000, the new law pushes back the deadline by which qualified first-time homebuyers must make a transaction in order to claim it. (The legislation defines “first-time homebuyers" as anyone who has not owned a principal residence in the three years prior to making the purchase.) Under the previous law, buyers needed to close the transaction by Nov. 30. However, under the terms of the new law, homebuyers must have a signed sales contract before May 1, 2010, but they have until the end of June to actually close the transaction.
Annual income limits raised
At the same time, the new law raises the annual income limits from $75,000 to $125,000 for singles and from $150,000 to $225,000 for married couples. The changes make nearly all first-time homebuyers eligible for the credit.
Current homeowners tax credit
In addition, the new law makes most current homeowners eligible for a tax credit of up to $6,500 when they purchase their next primary residence. Under the terms of the legislation, current homeowners must have lived in their home for five consecutive years over the previous eight to be eligible. Current homeowners can obtain the credit on homes purchased between Dec.1 and the end of April 2010. Similar to first-time homebuyers, this means they need a signed sales contract on a home before May 1, 2010, but they have until the end of June to close the sale. The income limits for current homeowners are the same as those for first-time homebuyers.
Renewed and expanded NOL carry-back rules
Great news! The recently signed Worker, Homeownership, and Business Assistance
Act of 2009 expands net operating loss (NOL) rules to include all companies, not just small businesses. Now, midsized and large businesses can elect to use a three-, four- or five-year NOL carryback against prior years income, instead of the normal two-year carryback. Thus, business losses incurred in 2008 or 2009 can now be used to recoup taxes paid in the prior five years by all business sizes. The provision is expected to put $33 billion of tax cuts in the hands of businesses.
New limits on expanded loss rules
One difference between the new provisions and the old ones is that the Worker Act of 2009 limits the amount of loss a large company can carry-back to the previous fifth year at 50 percent of that years’ taxable income. However, any remaining loss can be used to offset the other preceding years income. This limitation does not apply to the 2008 losses of small businesses with revenue of less than $15 million. The expanded loss rules are not available to TARP recipients or members of a TARP recipient’s affiliated group.
Business standard mileage decreases for 2010
The standard mileage rate has been set at 50 cents per mile for business travel in 2010. That's 5 cents down from the 55 cent allowance for business mileage during 2009. The mileage rate is used to calculate not only vehicle business use by self-employed persons but also to reimburse employees for the business use of personal vehicles.
Medical care mileage rate
You may also use the 2010 mileage rate of 16.5 cents-per-mile when using a car to get medical care or in connection with a move that qualifies for the moving expense deduction.
Due Date Reminder
December 31 - last day to set up a pension and profit sharing plan for 2009.
December 31 – individual state taxes paid by this date may be deducted on the 2009 federal tax return.
January 15 – 4th quarter 2009 individual estimated tax deposit due.
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