The ways things are going now, your tax bill for 2009 probably will look a whole lot better than the bill for 2010. What’s more, that bill is likely to be easier to swallow than the one ahead for 2011. That’s because 73 tax provisions expire in 2009, and another 40 in 2010, according to this report from the Joint Committee on Taxation.
To be sure, a good chunk of the provisions set to wither away will impact corporate America, rather than individuals and families. And, it’s always possible that some may be extended. Even so, it makes sense to have an idea of how the potential changes may impact your pocketbook.
These are scheduled to end in 2009:
1) Unemployment compensation: It may be small consolation, but if you were downsized this year, you get to exclude from your gross income the first $2,400 you received in unemployment compensation. If you’re married, and both you and your spouse lost your jobs, you each get to exclude $2,400. Here’s more from the IRS.
2) Deduction for state sales and excise taxes on car purchases: Need some new wheels? You have an added incentive to get them soon. Purchase a new (used won’t do) car or light truck between February 17 and December 31, 2009, and Uncle Sam will let you deduct any state and local excise and sales taxes you have to pay. You don’t want to go too wild, however, since the deduction is limited to the fees and taxes paid on purchases up to $49,500. And, this deduction is reduced if your income tops $125,000 (single filers) and $250,000 (married filing jointly). For more, check out the IRS website.
3) Deduction for qualified education expenses: If you’ve got a kid in college, or have headed back to school yourself, the tax code currently lets reduce your taxable income by the amount of tuition and fees you’ve paid, up to $4,000. Only certain expenses qualify, and the deduction can’t be used for room and board or transportation. Another note: it begins to phase out once your income hits $65,000 for single filers and $130,000 if you’re married and filing jointly.
Now, here’s a few that are slated to be gone after 2010:
1) Tax credit for energy efficiency: If you’re a homeowner and you’ve been meaning to go green, you might want to get on it. Between now and the end of 2010, you can get a tax credit of 30 percent of the cost of windows, doors, insulation, roofs, water heaters and a few other items, providing they meet certain energy efficiency standards. The credit is capped at $1,500 total over the two years – not $1,500 per year or product. And, you need to buy and begin using the gear some time between January 1, 2009 and December 31, 2010. More info is available at Energy Star.
2. The tax rate on dividends: For 2009 and 2010, the tax rate on qualified dividends (generally, those paid by domestic companies and which you’ve had for at least 60 days during a specified period) tops off at 15 percent. Unless it’s extended, the rate is scheduled to head up after 2010, as this report from Wipfli, a CPA firm, discusses.
3. The child tax credit. It’s not your imagination – your kids are costing you more. As it stands now, the $1,000 tax credit per child will drop to $500 after 2010, as the Tax Policy Center notes. (The credit declines by five percent if your adjusted gross income tops $110,000 for married filing jointly, and $75,000 for single parent filers.)
Having seen the list of all the tax benefits that could expire — some of which I wasn’t aware of in the first place — I’m going to be more diligent about making sure that we’re taking advantage of all that we can, while they’re here.
How about you? If these provisions aren’t extended, how will that impact your tax bills?
Copyright 2009 Karen M. Kroll