Tax Planning for Individuals, Continued...

As promised, we are back with more tax planning tips for End of Year Planning 2009. We hope for these tips to not only be informative, but also useful in your tax preparation. In fact, two of these next tips have been used by clients at our firm.



We'd first like to discuss an important topic not only for your taxes, but for our environment-Energy Efficient Improvements to your Home. Unlike many other tax benefits, these credits are not reduced or eliminated as your AGI increases and they offset Alternative Minimum Tax so they can provide a tax planning opportunity irregardless of your income level. The 2009 updates allow a 30% credit for "qualified energy-efficient home improvements" to your principal residence if located in the United States. Some conditions do apply, so be sure to check with your tax professional. First, the improvements must be in service in either 2009 or 2010. Secondly, there is a limit to the credit. It maxes out, cumulatively, at $1500 for the 2009 and 2010 tax years. Some examples of qualified improvements include the the following: energy efficient roofs, insulation, exterior windows including skylights, exterior doors, heat pumps, hot water boilers, and air conditioners. Please check with the manufacturer of any qualified improvements to ensure that your device meets the government requirements. In addition to the above credit applicable to only principal residences, a second part of the 2009 update allows for a credit for improvements for principal residences and second residences alike. A 30% credit for "qualified residential solar water heaters, geothermal heat pumps, wind energy property, and solar electric generating property" installed can be applied to your tax bill. In the case of the above tax planning opportunities, going green can also save you some green.



A second topic that may be of interest to some in light of the recent and current economic struggles is the opportunity to waive your required minimum distribution (RMD) for 2009, and 2009 only! The RMD's from employer-sponsored retirement plans and IRA's alike. This waiver can only be applied to distributions for the 2009 calendar year. If you have already received your 2009 RMD, you can keep the payment as you normally would and just simply report it in your income. If you want to avoid taxation of the distribution, then you are required to roll the amount distributed into an IRA within 60 days of receipt. However, the IRS recently announced that it will waive the 60-day requirement if you complete the rollover no later than November 30, 2009. Please note that if you have income tax withheld on these payout amounts, you may owe an estimated tax underpayment penalty by skipping the 2009 RMD. The waiver of the 2009 RMD must be analyzed carefully, so please consult your tax advisor.



Please tune in next week as we shift our focus to End of Year Tax Planning for Business entities including Establishing a New Retirement Plan for 2009 and Closely-Held Corporations Paying Dividends Over Year-End Bonuses. And in light of Thanksgiving, we'll talk a little bit about making the most of your charitable contributions!