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Major Tax Law Changes and Frequently Missed Items

1) Home Energy Improvements

Tax credits are available for certain home energy improvements such as insulation, windows, doors, roofing, heating, air conditioning and water heaters. The credit is 30% of the cost up to a maximum credit of $1,500. Taxpayers should obtain and keep the Manufacturer’s Certification statement.

2) Room and Board Expenses

The Midwestern Disaster Relief Legislation (still in effect for 2009 taxes) allows the taxpayer to claim room and board expenses (even if living at home) in addition to tuition, fees and books. Congress enhanced and renamed the Hope Credit to include four years of college, increased the credit amount and made the credit 40% refundable.

3) First Time Homebuyers

The First Time Homebuyer Credit has been extended into 2010. The credit is 10% of the purchase price up to $8,000. The taxpayer must have entered into a contract to purchase before April 30, 2010 and must close by June 30, 2010.

4) Homebuyer Credit

Taxpayers purchasing a home, but not qualified as a first time buyer, are eligible for a new credit of 10% of the purchase price up to a maximum credit of $6,500. To qualify, the taxpayer must have owned and occupied their previous home for at least five of the last eight years.

5) Real Property Tax Deduction

In addition to the standard deduction for 2009 allowed to non-itemizers, taxpayers can now deduct up to an additional $500 ($1,000 for joint filers) of property taxes paid. The standard deduction can also include sales taxes paid on the purchase of qualifying new cars, motorcycles, trucks and motor homes.

6) IRS Notices

If you receive a notice from the IRS, don’t assume that it’s correct and automatically pay it. Many IRS notices just require you to give the IRS additional information to show why you do not owe the additional taxes or penalties. Always consult with your tax preparer when you receive IRS notices.

7) Teachers

If you are a teacher who spent your own money for classroom supplies, this is the last year you can take a deduction for up to $250 of those costs.

8) Unemployment Compensation

If you received unemployment compensation in 2009, the first $2,400 is not considered taxable income.

9) Traditional and ROTH IRAs

You have until April 15, 2010 to contribute funds for 2009 into your traditional or ROTH IRA. Under age 50 you can contribute up to $5,000 per year. Over age 50, the maximum annual contribution is $6,000.

10) Military Personnel

Military personnel may elect to treat combat pay that is excluded from gross income as earned income in determining both eligibility for the earned income tax credit and the amount of that credit.

11) Mortgage Insurance

In 2009, premiums that are paid or accrued for “qualified mortgage insurance” in connection with home acquisition debt on your residence are deductible as home mortgage interest.

12) Mutual Fund Shares

Your cost basis in mutual fund shares includes reinvested dividends.

13) Overlooked Deductions

These items are often overlooked by taxpayers who itemize their deductions:
• Depreciation on a self-owned computer or cell phone required to do your job
• Education that is employment related
• Home office or part of your home used regularly and exclusively in your work
• Job search expenses in your present occupation
• Business, medical and charitable mileage
• Legal fees related to doing or keeping your job and protecting or collecting taxable income
• Subscriptions to professional journals and trade magazines related to your work
• Tools, supplies and safety equipment used in your work
• Travel, transportation, entertainment and gift expenses related to your work