Taxpayers claiming this credit will not be able to e-file this year.
Legislative changes in November 2009 expanded and extended the credit and also added documentation requirements for claiming the credit. For homes purchased after November 6, 2009 a copy of a properly executed settlement statement is required to be attached to the return. Due to increased compliance checks by the IRS, it is highly recommended that a copy of a properly executed settlement statement be attached to all returns claiming the credit, regardless of the date of purchase. Proper documentation will help to expedite the processing of the return when attached on any claim for the credit.
Form 5405 (to claim the credit) is not eligible for e-file. The IRS will not begin processing paper filed Forms 5405 until mid-February.
Learn more about the First-Time Homebuyer Credit by going to: https://www.irs.gov/newsroom/article/0,,id=204671,00.html
Saturday, January 30, 2010
Tuesday, January 19, 2010
Municipal Bonds rates up
An interesting side-effect of the financial crisis is that interest rates on municipal bonds are now about the same as the rates for US Treasury bonds. Usually muni rates are lower than Treasury rates. High-income investors accept the lower rates because muni interest is exempt from Federal income tax. Currently, however, many investors are concerned about the safety of municipal bonds, because many of the state and local governments that issue them are having serious budget problems. Also, bond-insurance companies have been hit hard by the crisis, adding further stress to the market. Higher demand for Treasuries and lower demand for munis has lowered the market rates on the former and raised them on the latter.
One would think this situation would eventually return to normal, but there is a new development in this mix. There is a Federal subsidy available to state and local governments that issue taxable bonds. The feds will pay 35% of the interest that the states and locals are on the hook for. This subsidy is scheduled to expire at the end of this year, but it could be extended, because it appears by some calculations to be more efficient than having a tax exemption for muni bonds. If it became permanent, it could change the market for municipal bonds permanently, according to The Economist, an international weekly news and economics magazine.
Does this mean that muni rates will stay high? It could mean that, but theories to project investment values don't always work out. Investors will need to watch carefully and be mindful of the elevated risk.
One would think this situation would eventually return to normal, but there is a new development in this mix. There is a Federal subsidy available to state and local governments that issue taxable bonds. The feds will pay 35% of the interest that the states and locals are on the hook for. This subsidy is scheduled to expire at the end of this year, but it could be extended, because it appears by some calculations to be more efficient than having a tax exemption for muni bonds. If it became permanent, it could change the market for municipal bonds permanently, according to The Economist, an international weekly news and economics magazine.
Does this mean that muni rates will stay high? It could mean that, but theories to project investment values don't always work out. Investors will need to watch carefully and be mindful of the elevated risk.
Tuesday, January 12, 2010
Estate Tax, part 4
The Estate Tax was allowed to expire, an outcome that was set in motion by a law passed in 2001. So, at the moment there is no “death tax.” However, Congress plans to resurrect it, probably retroactive to January 1, 2010. The only reason they let it expire was that they were too busy arguing about health care.
In 2009 the estate tax exemption was $3.5 million, with a 45% tax on everything above that amount. Guesstimates are that the new law will have an exemption of between $3.5 million and $5 million.
Stay tuned for further developments.
In 2009 the estate tax exemption was $3.5 million, with a 45% tax on everything above that amount. Guesstimates are that the new law will have an exemption of between $3.5 million and $5 million.
Stay tuned for further developments.
Section 179 and Bonus Depreciation
A tax provision that many small businesses take advantage of every year is the ability to write off in full the purchase of machinery and equipment (including heavy vehicles) instead of depreciating it. This is known to accountants as the Section 179 deduction.
The limit for this write-off had been temporarily increased to $250,000 for 2008 and 2009, but because Congress was preoccupied with health care at the end of last year, the limit automatically reverted back to $134,000 for 2010.
Congress can still take action to restore the higher limit, and many analysts predict that they will do so. And there is a good chance that they will make the remedy retroactive to January 1.
Another depreciation break that expired at the end of 2009 was a 50% bonus—an option to write off half of certain new machinery and equipment in the year of purchase. That too has a strong chance of being revived. If it is restored, it can be used on top of the expense deduction described above, such as for purchases over the $134,000 (or $250,000) limit.
The limit for this write-off had been temporarily increased to $250,000 for 2008 and 2009, but because Congress was preoccupied with health care at the end of last year, the limit automatically reverted back to $134,000 for 2010.
Congress can still take action to restore the higher limit, and many analysts predict that they will do so. And there is a good chance that they will make the remedy retroactive to January 1.
Another depreciation break that expired at the end of 2009 was a 50% bonus—an option to write off half of certain new machinery and equipment in the year of purchase. That too has a strong chance of being revived. If it is restored, it can be used on top of the expense deduction described above, such as for purchases over the $134,000 (or $250,000) limit.
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