Tax Tip for
Oct
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 | The option to claim an itemized deduction for state and local general sales taxes instead of the itemized deduction for state and local income taxes. |
| The above-the-line deduction for qualified tuition and related expenses for higher education paid during the tax year. |
| The up-to-$250 eligible educator's above-the-line deduction for books, supplies, computer equipment, etc., used by him or her in the classroom. |
| The up-to-$100,000 annual exclusion from gross income for taxpayers age 70 1/2 or older who make direct transfers of otherwise taxable individual retirement account (IRA) distributions to qualified charitable organizations. |
The new law also extends for one year the nonitemizers' additional standard deduction for state and local property taxes paid. The deduction can't exceed the lesser of state and local property taxes actually paid or $500 ($1,000 for joint return filers). This deduction was supposed to have been available only for 2008, but the new law makes it available for 2009 as well.
Deductions for energy saving home improvements extended and expanded. The Stabilization Act includes many energy related tax breaks for individuals and businesses. Two tax credits are available for taxpayers who make energy saving improvements to residences. They've both been extended by the new law and expanded as well:
(1) A generous tax credit is available to individuals who add solar energy equipment or fuel-cell equipment to their residences. The new law extends this credit through 2016. It also liberalizes the credit in an important way: For 2008, you can claim a tax credit of 30% of the cost of equipment that uses solar energy to generate electricity (photovoltaic property), up to a $2,000 maximum tax credit. After 2008, there's no dollar limitation on the credit. For example, suppose you spend $8,000 buying and installing solar heating panels on your residence. If you make the improvement in 2008, you may claim a maximum credit of $2,000, but if you make the improvement in 2009, you may claim a credit of $2,400 (30% of $8,000).
(2) For equipment installed before 2008, you could claim a credit for the cost of buying an assortment of energy saving improvements and installing them in your main home. The credit depends on the type of improvement (e.g., 10% of the cost of energy efficient building envelope components, such as insulation and windows, and an up to $150 credit for a natural gas, propane, or oil furnace or hot water boiler) and there's an overall $500 lifetime dollar limit for all improvements.
The new law does not extend this credit for qualifying equipment bought and installed in 2008, but it does make it available once again for qualifying equipment bought and installed in 2009. Also, for 2009, the new law makes the credit available for certain types of energy efficient biomass fuel stoves and certain types of energy saving asphalt roofs.
Please keep in mind that the above only highlights some of the changes in the new law. Please feel free to contact us if you need more details on how you may be affected by this important tax legislation.
