New Tax Law Changes for 2010 Boyee!
The times are a changin', and so are the tax laws my friends. So today I thought I'd post up a few interesting changes that caught my eye from a newsletter (pdf) forwarded over to me. This tax love comes straight from CPA Lisa Scarazzo, and goes out to all her clients each year.I wanted to post it all up, but 5+ pages might have bored ya so we stick with a few ;) But mad thanks to Lisa for allowing us to post this up! You can find her & all her awesome accountant skills over at LAScpa.com. Here's what we got:
Ponzi Scheme Losses
A new law is allowing taxpayers to take a theft loss in 2009 for investment fraud. If the taxpayer invested their own cash and the loss is generated from a criminal fraud or embezzlement similar to the Madoff scheme, the loss will be deducted from ordinary income. The loss is deductible in the year it is discovered and not limited to the $3,000 capital loss per year rules.
Converting a Traditional IRA to a Roth IRA
In 2010 anyone can convert money they've already invested in a traditional IRA into a Roth IRA. There will be no adjusted gross income limit for the 2010 year. That is a change from current law where the IRA conversion is not allowed if your adjusted gross income is $100,000 or greater when you convert to a Roth. You will owe tax on whatever amount you have converted from the traditional IRA to the Roth IRA. After paying the tax on the conversion today, you will never pay any tax in retirement or when it is withdrawn. The good news is that if you convert in 2010, the tax bill can be spread over two years. (J - we'll be converting about $900 of the Mrs. traditional over to a Roth this year - woohoo!)
New and Enhanced Home Buyer's Credit
This credit has changed for 2009 into two different credits: 1) Existing Home Owners that have lived in and owned their home for at least 5 out of the last 8 years, and 2) First Time Home Buyers. Both of these credits have income limitations so please check with our office for further details to see if you qualify.
- Existing Home Owners now have the opportunity to purchase a new home if they have owned their current home for at least 5 out of the last 8 years and receive a credit up to $6,500 or 10% of the purchase price of the home. The total purchase price of the home can not exceed $800,000. The new principal residence must be purchased after November 6, 2009 and on or before April 30, 2010 (or purchased by June 30, 2010 with a binding sales contract signed by April 30, 2010).
- The First Time Home Buyer Credit is available on the purchase of a principal residence for individuals who have not had an ownership interest in a home during the 3-year period ending on the date of the purchase of the new home. This does not apply to home equity loans not used to buy, build or improve the primary residence. The credit is increased to a maximum of $8,000 or 10% of the purchase price for homes purchased between January 1, 2009 and April 30, 2010 and the credit does not have to be paid back to the IRS in the future (this differs from the 2008 $7,500 credit).
In general, if a taxpayer is forgiven or absolved of their debt (credit cards or mortgages), the debt becomes taxable income. The Mortgage Forgiveness Debt Relief Act will exclude debt forgiveness from taxable income if the taxpayer's debt was a mortgage from their principal residence and the debt was used to buy, build, or improve their residence (home equity debt does not qualify). This is for years 2007, 2008, and 2009.
*ALERT* IRS Email Scam
An email is circulating that makes a statement similar to this: "A refund will be issued to you from the IRS if you follow these instructions." This is a scam - the IRS does not send emails to individuals. The IRS only sends correspondence via the U.S. Postal Service. Never open an email that claims to come from the IRS.
Financial Steps to Solvency
Many individuals are looking for ways to financial recovery. Here are my recommendations: (J - links go to my posts, not Lisa's....although would be interesting to see her go into more detail ;) )
- Cut Spending.
- Track Expenses & Budget.
- Increase income (if possible) by taking a second job.
- Pay off high interest loans & negotiate lower interest rates on loans & credit cards.
- Pay bills timely and make contact with creditors to set up a payment plan for overdue bills.
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Get ready for a handful of TurboTax giveaways tomorrow!!
Labels: bankruptcy, foreclosure, roth ira, taxes
posted by J. Money at
7:48 AM
12 Comments:
Darn you, New Home Buyer's Credit! This is the year (we bought in 2008) that we have to start paying back $500 for our 'tax credit'. Grrr...
I hope that home buyers credit keeps getting extended...I'll keep my fingers crossed!! :)
Yeah, I bet the home buyers credit remains for a bit. I think the coolest is the Traditional IRA --> Roth! A great deal if you have lots to convert and can pay the tax fees okay ;) I'm all about never paying taxes on my investments again! Although you never know what's possible w/ our Gov't sometimes...
That new home buyers tax credit is lighting a fire under my a$$. Combine that with homes that are "half off" and super low interest rates, I'm going to see what's out there with my real estate agent today.
-StackingCash
Wow, good for you! I will admit there is a HUGE sale on homes right now that's for sure :) Just make sure you're *really* ready for it my friend!
Im still waiting for the big tax change, abolish the IRS and federal taxes and go to the fairtax. Hey I can dream cant I?
You sure can. I have no idea what the "fairtax" is but it at least sounds good!
Hello.
With the Existing Home Owners credit, do the current home owner/2nd property buyer have to make the second purchased home a primary residence?
That's sad that there's a Ponzi scheme victim write-off.
No luck on the new house search :( In this market I'm too picky when it comes to a new home. The existing home owners credit does require the second home to be your primary residence.
-StackingCash
it's a good thing that there's an extension keep up the extension period. hopefully.
StackingCash - Good for you! I'm sure it's frustrating trying to find the "perfect" one, or close to it, but much better than settling or rushing into something just to get a credit/etc. If you keep looking, it's only a matter of time until you find The One.
if you have an iPhone, download the free "Realtor.com" app - it's awesome!!! it uses your location to pull up all houses & open houses on the market and shows you the pictures, details, etc. from the MLS listings. i check it whenever i'm in a new area and it's really eye opening to see! plus you can tag your favorites or email them to yourself.
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