Phone: 651-298-1188
Fax: 651-228-1952

624 Grand Avenue
Saint Paul, MN 55105

JANUARY 22, 2010

News for 2009 and 2010 returns

•    Stock sales during 2009 may qualify for a 0% capital gain rate on the Federal return. That means that in some cases you would pay NO tax on your profit.

•    The current capital gain tax is capped at 15%. As of now, that rate will be in effect through 2010.

•    The provision that taxes dividends at capital gains rates is due to expire 12/31/2010.

•    The first $2400 received in 2009 on unemployment will be tax free on the Federal return.

•    Energy credits have been restored and increased. The maximum credit is $1,500. Windows, doors, insulation, some roofs may qualify.  Certain water heaters, air conditioners, and furnaces may also qualify. The energy credits are in place for 2009 and 2010. A website – www.enertystar.gov will have details about what qualifies.

•    Sales tax on the purchase of new cars, light duty trucks, motor homes and motorcycles purchased from February 17, 2009 through December 31, 2009 can be deducted whether  a taxpayer itemizes or not. The deduction is for sales tax on the purchase up to $49,500 and some income limitations may apply.

•    A “Making Work Pay Credit” has been reflected on your paycheck with reduced Federal withholding beginning spring of 2009. The reduced withholding and corresponding credit will extend through 2010.

•    “First time homebuyers” get a credit of $7,500 to $8,000 depending on the time of their purchase. This credit expires 4/30/2010. New home purchases after that date do not qualify for most people. Special consideration is given to military personnel and people who have a binding contract written before 4/30/2010.

•    For those homeowners who lived in a home for five years and then purchased a new home between 11/6/09 and 4/30/2010 may qualify for a credit of $6,500.
•    Education credits were expanded for 2009 to include new limits and new eligible expenses.

•    Taxpayers over 701/2 who were required to take a minimum distribution from their retirement plans had the option in 2009 to waive the distribution. For 2010 the waiver is no longer an option.

•    Tax year 2010 presents an opportunity for people to convert their current IRA to a Roth IRA. Former income limitations have been lifted and the tax can be paid over two years. Conversions don’t make sense for everyone so a consultation outside of the tax season might be needed to assess the specifics of your unique situation.
•    For 2009 and 2010 contributions to an IRA were limited to $5,000. If you were age 50 and older you could contribute $6,000.

•    The limit on contributions to your 401K for 2009 and 2010 is $16,500. Those 50 and older could contribute $22,000.

•    Minnesota reciprocity agreement with Wisconsin will end effective January 1, 2010. For Minnesota residents working in Wisconsin this means they will have to file a Wisconsin return as a nonresident as well as a Minnesota return. Wisconsin residents working in Minnesota will have to file a Minnesota return as a nonresident as well as a Wisconsin return.
 
Back in 1977 a tax act was passed. It was called the “The Tax Reduction and Simplification Act of 1977”. Since then numerous tax bills have passed. Though some tax reduction has happened (along with a lot of increases!) there has really been no simplification. Tax laws are more complex than they have ever been. We encourage you to seek professional help in order to sort through the maze. The Morality of Tax Savings

 “…Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor: and all do right, for nobody owes any public duty to pay more than the law demands; taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.” Judge Learned Hand