Tax Planning and Estate Tax

Here are some things you might like to be aware of (or not care about) as you contemplate your tax situation for the end of 2009.

1. The first-time home-buyer tax credit has been extended and expanded.

2. Sales tax on a new vehicle is deductible even if you don't itemize. You can deduct the sales tax on the first $49,500 of your purchase. If you buy more than one car, you can deduct the sales tax on the second or third car, too.

3. As in 2008, non-itemizers can deduct some of their real estate taxes ($500 for single people and $1,000 for married filing jointly).

4. In fact, for 2009, there are so many things to account for for non-itemizers that they have to file a form as big as Schedule A to keep track of them.

4. Minimum Required Distributions from IRAs are NOT required for 2009 for those over 70 & 1/2.

5. New energy credits now at a rate of 30% and a maximum of $1,500, except on solar and wind, on which there is NO limit.

Looking forward into 2010, income tax rates are expected to stay the same as in 2009. However, in the area of the Estate Tax (also know as the Death Tax), there is no real certainty about what will happen for 2010. The best guesses throughout the year up to now have been that the 2009 estate tax rates and structure would be extended into 2010. However, Congress has been so tied up with health care that they have not gotten around to doing anything about the estate tax. Under existing law, there will be no estate tax at all in 2010. It has been phased down for the last few years, and next year it is scheduled to disappear. Unfortunately, if nothing is done before 2011, that year's estate tax will revert back to the old law, which taxed everything over $1,000,000 at 55%. Congress still has some time to change the 2010 law, since the estate tax returns are not due till nine months after the person dies. Therefore Congress could theoretically wait until September to change the law. At any rate it will be interesting to watch what happens.

Also in 2010, the restriction against converting a regular IRA to a Roth for people with income over $100,000 has been eliminated, and taxpayers are given two years to pay the resulting tax. However, because of the amount of taxes that will be generated by such a conversion, taxpayers are urged to exercise caution and consult carefully with their tax advisers before they make such a move.