Archived News
Changes to the Car Sales Tax Deduction
Have you recently bought a new vehicle, or do you plan to buy one before the end of the year? If so, remember to deduct the sales taxes you paid on your 2009 tax return.
Deductions for car sales taxes have been available for the past several tax seasons to taxpayers who itemize deductions. In 2009, the tax deduction can be taken by taxpayers who do not itemize their deductions.
From the IRS:
"To qualify for this deduction, the vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010. Taxpayers can claim this special deduction only on their 2009 tax returns to be filed next year.
The deduction is limited to the fees or taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle.
The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.
The special deduction is available regardless of whether taxpayers itemize deductions on their returns. Taxpayers who do not itemize will add this additional amount to the standard deduction on their 2009 tax return."
Lower inflation may change your IRS deductions
Taxpayers contributing to 401(k)s or other retirement plans may be in for a surprise in 2010. IRS rules calculate retirement plan contribution limits on the prior year’s third quarter Consumer Price Index (CPI).
If July’s CPI declines continue into August and September, the resulting lower CPI could cause a reduction in the 2010 retirement contribution limits.
It is unclear at this time if the IRS will lower the contribution rates. Even if they do lower the rates, congress could step in and pass a law to reinstate the previous rates. The IRS is expected to release the 2010 contribution limits on October 15.
Lower inflation will be affecting Social Security recipients as well. There will be no cost of living adjustment (COLA) in 2010. Benefits will remain the same as 2009, however Medicare premiums are set to increase in 2010. The result will be lower benefit payments to all Social Security recipients.
IRS on Youtube and IRS delays
The IRS has posted some videos on Youtube of various topics including the First Time Home Buyer Credit and Tax Scams. You can check out the videos at
Also, the IRS is reporting that amended returns (1040X) are being delayed due the massive amount of returns received. The IRS estimates a 12-16 week processing time for all amended returns.
Save Green by Claiming Energy Tax Credits
For the past several years, energy-saving credits have been added to the tax code. These credits have been recently expanded by the Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009. Here are several examples:
Energy-efficient commercial building deduction - Normally commercial buildings are depreciated over 39-years. This deduction allows for an additional $1.80 per sqare foot deduction for energy-efficent features in a commercial building. A professional engineer is required to analyze the improvements, but the benefits of accelerating depreciation can save you a substantial amount on your taxes. This credit is currently available until 2013.
Residental Home Improvement Credit - Individuals can improve their residences with energy efficient items such as added insulation, new HVAC units, or new windows. Since there are many different types of improvements that qualify for this credit, most manufactures specially mark their products that qualify. The credit is 30% of qualifying improvements, maximum of a $1,500 credit. This credit is currently available in 2009 and 2010.
Residental Energy Credit - Individuals that install solar, wind, or geothermal energy systems qualify for a credit that equals 30% of the cost of the equipment and the installation. This credit is good for personal homes as well as rentals and second homes. This credit is currently available until 2016.
There are several more credits available. If you would like to know more about these and other credits, feel free to contact us at APH CPAs.
Tennessee Revised Franchise & Excise Tax Changes
Recent legislation has changed the definition of a Family-Owned Non-Corporate Entity (FONCE). For many years, family-owned LLC's and LP's have been exempt from franchise and excise (F&E) taxes if 95% of its income was derived from passive sources like interest, dividends, and rents.
With the new legislation, rental income from the following sources no longer qualify for the FONCE exclusion:
- Rental of commecial or industrial real estate
- Rental of residential real estate if the property contains more than four living units ("quad-plex" or apartment complexes)
- Rental of farm real estate if mainly used for recreational purposes
This change could cause your family-owned LLC or LP to fail to qualify for the FONCE exemption and subject your income to Tennesse F&E taxes.
There are some methods to continue qualifying for the FONCE exemption. However, these methods require changing the liability protection offered by the LLC or LP. In additon, these methods require that the LLC or LP file statements with the TN Secretary of State's office by October 1, 2009 to qualify for the 2009 tax year.
If you would like more information on how to prevent an unexpected F&E tax bill next year, give us a call!
Cash for Clunkers
Cash for Clunkers: This program is a great idea, but it is not easy to understand! Generally, you have to buy or lease a new vehicle and trade in your old, less fuel efficient one. Sounds easy, right? Well, here are some quick things to remember:
- Your curr?nt vehicle can not be older than 25 years.
- Your new vehicle base price can not be over $45,000.
- Your new vehicle needs to get at least 4 more miles per gallon (MPG) more than your old vehicle.
- The credit is either $4,500 or $3,500 depending on the difference between the MPG of your current vehicle and your new vehicle.
- There are completely different rules for cars and trucks, AND there are several categories of trucks.
- You do not need a voucher to get the credit. The dealer will just apply the credit to the purchase price.
- You have to have had your current vehicle insured for at least one year.
- You have to have clear title. All vehicle loans must be paid off.
- The credit amount is not subject to federal income tax, but it is subject to Tennessee sales tax.
- You still are entitled to other dealer discounts and rebates. This credit can not replace those credits under the law.
- Not all car dealers are eligible to give the credits.
See-very confusing! Call APH CPAs, a Nashville accounting firm, if you have questions.615-376-8800. You can also check out www.cars.gov for more information.
403(b) Retirement Plan Audits
If you have a 403b plan for your public school or tax-exempt organization, you may now have to have that Plan audited every year. This is a new requirement by the Department of Labor, and it's expected that 8,000-10,000 plans will have to be audited for the first time in 2009.
If you have over 100 participants at the beginning of 2009, you may be subject to the audits. These audits aren't easy to get ready for, since 2008 numbers also have to be audited and presented. Don't delay - get ready for these 403b audits now and avoid the fines from filing late 5500s.
Call us to see if your 403(b) defined contribution retirement plan needs an audit. 615-376-8800 extension 205. We can help you get in compliance with this new audit requirement.
APH CPAs Congratulates New CPA
APH CPAs congratulates Craig Ballentine on being awarded Certified Public Accountant (CPA) status by the State of Tennessee. Originally from Portland, Tennessee, Craig has been employed with APH CPAs since June 2004, when he began working as an intern from Trevecca University. Craig graduated from Trevecca in 2007 with an MBA and assists small businesses with their tax and accounting needs.