Wednesday, December 9, 2009

Year End Tax Moves

2009 was a rough year financially for many Americans. You could not turn on the news with out hearing about business closures, layoffs, foreclosures and bailouts. Lets be honest, between lost jobs, shrunken paychecks and disappearing bonuses it's been a time of more pain, less gain. But the year is not over and there are tax-savvy moves you can still make to pull some financial cheer out of an otherwise dreary 2009

  • Gather Your Stock Market Losses.

Almost everything you own and use for personal or investment purposes is a capital asset. Examples are your home, household furnishings, and stocks or bonds held in your personal account. When you sell a capital asset, the difference between the amount you sell it for and your basis, which is usually what you paid for it, is a capital gain or a capital loss. Capital gains and losses are classified as long–term or short–term. If you hold the asset for more than one year before you dispose of it, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term. If your capital losses exceed your capital gains, the amount of the excess loss that can be claimed against ordinary income is $3,000. In what's often called tax loss harvesting, investors can sell assets that have generated large losses in after-tax accounts and use those losses to offset taxable income or even future gains. The losses can be used to offset capital gains as well as up to $3,000 of regular income each year. Any amount exceeding the $3,000 threshold can be carried forward to offset gains in the following year. IRS rules allow an investor to buy the asset back after 31 days — and still claim the tax loss.

  • Donate to a Charity

There are many people and organizations in need today, so it's a good time to review your charitable donations for the year. Donations can take the form of cash, electronics, cars, jewelry, paintings, stocks, real estate or clothing. Any donation of $250 or more requires a receipt as documentation. Property valued at more than $5,000 requires a written appraisal confirming its fair market value. There are also dollar limits: cash contributions cannot exceed 50% of adjusted gross income while property donations cannot top 30% of AGI. Contributions that exceed these limits can be carried over to the following tax year. President Obama has proposals on the table to put further limits on deductions for charitable contributions as a means of raising cash to cover the country's swelling deficit, stimulus package and health care reforms. So, taxpayers may want to max out their charitable contributions this year while limits are still generous.

  • Go For Energy Efficiency

Going green can offer a pretty nice payback at tax time. The IRS, through the federal stimulus package, is offering tax credits to individuals and businesses that make or use energy or energy-efficient products in 2009 and 2010. But you have to spend in 2009 to take the credit against this year's taxes. A homeowner buying energy-efficient windows, doors, water heaters or biomass stoves and those purchasing insulation, metal or reflective asphalt roofs and solar-energy systems can receive credits of 30% of the cost up to $1,500 in total. People purchasing geothermal heat pumps, solar panels and wind generators can get credits of 30% (up to $1,500) for each item through 2016. People buying plug-in hybrid electric cars can get tax credits of between $2,500 and $7,500.


Ramakrishnan said...

Is charitable donation to foreign institutions are eligible for US tax deduction?

Anonymous said...

No, only U S institutions are eligible.

Angelo Liberati CPA, CFE said...

Wednesday, December 16, 2009

Hello. Personal household furnishings are not capital assets. Any gain or loss from the sale of household furnishings is not included on one's federal Individual Income Tax Return.

The gain or loss computed on the sale of a primary residential home is not treated the same like the gain or loss computed on the sale of stocks and/or bonds. For one thing, there is a possibility for a once in a lifetime exclusion on the gain computed from the sale of a primary residential home. Also, a loss that is realized from the sale of a primary residential home is never deductible on one's federal Individual Income Tax Return.

Thank you.