This year may be active in terms of changes to the tax code.
In 2009, it seemed as if new tax laws were being passed, amended, or extended monthly. This year may be another active one of changes to the tax code. I encourage you to begin the tax planning process earlier than normal this year to take advantage of some of the opportunities. Some of the items I will have at the top of the agenda for my clients:
The new law added a $6,500 tax credit for taxpayers who are buying a principal residence and have owned and lived in the same home for five of the eight years preceding the new home purchase. It also allows 2010 buyers to claim the credit on either their 2009 or 2010 returns.
It seems unlikely this tax credit will be extended again. Keep in mind, though, that on a $300,000 home, $6,500 is 2.1% of the purchase price, so small changes in the price as well as the costs to carry your current residence until it sells may quickly wipe out any benefits of receiving the credit.
Effective January 1, 2011, the top tax rate increases from 35 percent to 39.6 percent, and the long-term capital gain rates increase from 15 percent to 20 percent. President Obama repeatedly has stated that he will not raise taxes on married couples making less than $250,000 and singles with incomes less than $200,000, so comprehensive legislation in 2010 will have to prevent this from happening. If you are planning to accelerate income into 2010, then closely monitor the discussion in Congress to ensure that changes made do not affect your planning.
The author is a fee-only certified financial planner with Preston & Cleveland Wealth Management LLC (http://www.preston-cleveland.com) in Atlanta and Augusta, Georgia, and a member of the National Association of Personal Financial Advisers. The ideas expressed in this column are his alone and do not represent the views of Medical Economics. If you have a comment or a topic you'd like to see covered here, please e-mail firstname.lastname@example.org