NOVEMBER 2009 VOLUME 3, NUMBER 3
& Tax, Inc.
Accountant Prepay Bills
Kellie Becket, CPA
You can prepay a few of your 2010 bills by December 31, 2009 and take a
deduction for them on this year’s tax return.
1) Make your January mortgage payment in December and claim the
interest in 2009. Make sure you pay it so that your mortgage company
60555 gets it by 12/31/09 so that it is included on your 1098 for the year.
2) If you qualify for a medical deduction, consider prepaying some
Phone: expenses such as purchase a year’s supply of contacts or buy a new
(630) 393-9005 pair of glasses or pay for your child’s braces all at once.
3) If you make estimated tax payments to the state, pay the 4th estimated
Fax: tax payment that is due on January 15, 2010 on or before December
(630) 393-9054 31, 2009.
4) Consider paying some or all of your 2010 pledge to your church or other
Beckettax@aol.com charities on or before December 31st.
Maximize your 401k and IRA contributions
Mon-Thur 4 – 8
Sat 8 - ??
If you have a 401k plan that your employer matches make sure that you
contribute at least the maximum amount to take advantage of 100% of your
employer’s contribution. For example: if your employer will match up to 3% of
your salary and your annual salary is $50,000 in 2009, your employer will
match $1,500. Make sure your contribution is at least $1,500 for the year.
This is free money to you!
Make sure you contribute as much as possible to your 401k. It is the same as
receiving a tax deduction because it is notconsidered taxable income for federal
or state purposes. If you are in the 25% tax bracket and live in Illinois, you will
save a total of 28% of your contribution between the federal and state rates.
That means a $1,000 contribution to your 401k, you will save $280 in tax.
The same is true if you qualify for a deductible IRA. The good thing about
contributing to an IRA is that you have until April 15, 2010 to make the actual
contribution for 2009. This means that you can file your tax return in January
2010 and deduct your IRA contribution. When you receive your tax refund (7 to
10 days later because you electronically filed your tax return and requested it to
be direct deposited) you can then use your refund to help pay for the IRA.
Sell Losing Investments
2009 started out being a very bad year for the stock market. You may be
carrying some losing stock in your portfolio that you want to get rid of. Selling
them at a loss will create a net capital loss. You are allowed to offset up to
$3,000 of your regular income (wages, interest, dividends, etc) with a capital
loss. If your loss is greater than $3,000 you can carry this forward to other tax
Check out this site!
Sell Investments at a Gain
The capital gains rate is 0% for taxpayers in the 10% and 15% tax bracket.
For single individual’s that would be taxable income of up to $33,950 and for
married individual’s filing jointly, $67,900. For everybody else the capital gains
rate is 15%. These rates should remain in effect through 2010 unless Congress
votes to extend them. After 2010 they increase back to the old rates of 10%
and 20%. That means that now is a good time to sell capital gain property.
Consider this: I have a single friend who is self employed. This was a bad year
for her business and her taxable income is $30,000 for 2009 which means that
she is in the 15% tax bracket. Being in the 15% tax bracket means that the
capital gains tax rate is 0%. Back in 1994 she bought 100 shares of IBM for
$58. She sold this stock on October 30, 2009 for $121 per share. Her total
gain is $6,300 ($12,100 - $5,800). Since she is in the 15% tax bracket she
benefits from the 0% capital gains tax bracket and will pay -0- tax on this
$5,800. On November 2nd she turned around and repurchased 100 shares of
IBM at $121 per share. The only money out of her pocket is the commissions
she paid on the sale and purchase of the stock. Now her basis is $121 so that if
down the road she sells these shares at a gain, her taxable gain will be smaller.
If she sells the stock at a loss, she can deduct the loss on her return.
If you would like to
see a particular tax
topic in a future Donate Appreciated Property to a Charity
edition of Taxing Talk
please email your As long as we are talking about stock, let’s continue. You should consider
donating appreciated stock to your favorite charity. By doing this you will be
request to allowed to deduct the fair market value of the stock you gave on your 2009 tax
Example: You purchased 100 shares of IBM in 1994 for $5,800. In October of
2009 you decide to give these 100 shares to your church. At that time, they
are valued at $12,100 on the NYSE. Your tax deduction will be $12,100 and if
you are in the 25% tax bracket, you will save $3,025 in taxes. Let’s say that
instead of giving the stock, you decide to sell it first and then donate $12,100 in
cash to the charity. Your gain on the sale of the 100 shares of IBM is $6,300.
This is a long term capital gain and will qualify for the favorable capital gains
rate of 15%. The tax on the gain will be $945. What would you rather do, save
$3,025 by donating or save $2,080 by selling the stock first and then donating
Credit for “Green” Homes
If you were thinking about improving the energy efficiency of your home, 2009
and 2010 is the time to do it. The IRS will give you a credit of 30% for a
maximum credit of $1,500. The credit is available for the following:
- Exterior windows and doors
- Water Heaters
- Biomass Stoves
In order for the above expenses to qualify for the credit: (1) they must be
placed in service between January 1, 2009 and December 31, 2010 and (2) you
must have a “Manufacturers Certification Statement” along with your receipt.