Jeffrey D. Brown, CPA, PC

It's hard to believe that we are already rolling around to another tax season. The holidays and your last chance for many tax saving deductions will soon be in the past and we do not want you to miss these opportunities. It's possible that we can make small changes now that will make a big difference in your tax bill.

Retirement Savings Limits for 2009: 401(k): You can contribute up to $16,500 ($22,000 for 50 and older). Roth or Traditional IRA: You can contribute $5,000 to an IRA ($6,000 for 50 and older). Be aware that some retirement contributions may be subject to income limitations.

Looking ahead to 2010? Right now, there is a special exception to the usual income limits on who can convert a traditional IRA to a Roth IRA for the year 2010 that allows high-income taxpayers to make a Roth IRA conversion when they would normally be prohibited by the income limits. Please refer to tax rules in 2010 for updates regarding eligibility requirements.

For home purchases made after January 1, 2009 and before December 1, 2009 , a first-time home buyer can receive a refundable tax credit equal to 10% of the purchase price of the home with a cap of $8,000 ($4000 for married taxpayers filing separately). Income limitations apply.

A first time homebuyer is a buyer who has not owned a principal residence during the past 3 year period prior to the purchase. For married taxpayers, the ownership history test applies to both spouses.

e.g. If you have not owned a principal residence in the past three years but your spouse has, neither of you qualify for the first-time home buyer tax credit. However, if you are looking at purchasing a residence and you or your joint purchaser are unmarried and qualify for the first time home buyer credit, there may be some opportunities to take advantage of this credit. Please contact our office as soon as possible to find out if this can apply to you.

If you receive the credit and sell your home within 36 months of purchase, the credit may need to be repaid.

For 2009 and 2010, the making work pay credit is a $400 refundable tax credit for individuals ($800 for married filing joint) limited to 6.2% of earned income. This is subject to a phase out for modified AGI of $75,000-$95,000 ($150,000-$190,000 if married filing joint). This credit is applied to payroll automatically if you receive a paycheck and are subject to withholding. Self employed can claim on their tax return. Reduced if you are receiving economic recovery credit or government retiree credit. Not available to non-resident aliens, individuals who can be claimed as dependents on someone else's return and estates and trusts.

Currently 2009 law offers an energy property credit of 30% with the credit limited to $1,500-$2,000 for the total of all 2009 & 2010 purchases. Per the IRS, "this property can include high-efficiency heat pumps, air conditioners, and water heaters. It also may include energy-efficient windows, doors, insulation materials, and certain roofs. The credit has been expanded to include certain asphalt roofs and stoves that burn biomass fuel."

Also, 2009 offers an energy efficient property credit of 30% of the cost of qualified solar electric property costs, qualified solar water heating property costs, qualified small wind energy property costs, and qualified geothermal heat pump property costs with no credit limit. The limitation on the credit amount for qualified fuel cell property costs remains the same.

Review your estate and beneficiary documents every year. Make sure you check if your assets are distributed among you and your spouse so you can take full advantage of the estate tax exemption and that you have the correct beneficiaries listed on your life insurance, 401(k) and other payable accounts.

If you're married, you can gift up to $26,000 to one individual free of gift tax ($13,000 from each spouse). If the person to whom you are gifting is married, you can gift each person up to $13,000 tax free.

If you are one of the many individuals who have been laid off this past year or otherwise qualify for COBRA, then the American Recovery and Reinvestment Act of 2009 (ARRA) may help you. Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit. This premium reduction applies to periods of health coverage beginning on or after February 17, 2009 and lasts for up to nine months for those eligible for COBRA during the period beginning September 1, 2008 and ending December 31, 2009 due to an involuntary termination of employment that occurred during that period.

Qualified Tuition from a 529 plan now includes the cost to purchase computer technology equipment and Internet access.

Given the state of the economy, some banks have cancelled part of the homeowners mortgage debt. Generally, this debt cancellation is tax free unless cash was used for non-home acquisition debt. Ie. Cash borrowed against mortgage for personal use. If you used this cash for personal purposes, ie trip, new car, etc., this cashout would be taxable to you.

There are new rules if you sell your home. Part of the previously excludable gain on the sale of your primary residence may now be taxable. Please be aware of this when you consider selling your residence.

If you're in a position to this year: Donate to your favorite charities before the end of the year and keep your receipts. Remember, the law requires that you have dated bank records or a dated receipt to a qualifying charitable organization as support of your contribution.

This year's recovery rebate is $250 to recipients of social security benefits, supplemental security income, railroad retirement benefits and veterans disability compensation or pension benefits. You had to receive a payrment in Nov or Dec 2008 or January 2009 to be eligible. This credit has no AGI limits.

Take time to organize your tax records now to relieve stress at tax time. Also, beware of phony emails stating they are from the IRS. The IRS does not send unsolicited emails. Finally, if you had or adopted a child in 2009, apply for a Social Security card as soon as possible to ensure you can claim your child as a dependent on your return for 2009.

If you have had a life change in the past year, such as:

• Birth of a child
• Marriage of you or a dependent
• Divorce
• Death of a spouse
• Start or closure of a business
• Purchase or sale of a house
• Sale of an inherited property
• Early withdrawal of funds from a retirement account
• Loss of a job
• Retirement of you or your spouse if applicable.

The following disclosure is required pursuant to IRS Circular 230 and applicable state and local tax provisions, the regulations that govern the practice of tax advisors. Any advice concerning Federal, state and local tax issues contained in this written communication (and any attachments) has not been written nor is it intended by the author or Jeffrey D. Brown CPA, P.C. to be used, and cannot be used, for the purpose of(i) avoiding federal, state or local tax penalties that may be imposed by the Internal Revenue Service or applicable state or local tax provisions, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. If a formal covered opinion intended to provide such protection is desired, please contact us to discuss the issues and costs involved in preparation of such a covered opinion. Internet communications cannot be guaranteed to be secure or without error as information could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. Therefore, we do not accept responsibility for any errors or omissions that are present in this message, or any attachment, that have arisen as a result of e-mail transmission. If verification is required, please request a hard-copy version. Any views or opinions presented are solely those of the author and do not necessarily represent those of the firm.