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Clients and Friends:
Tax filing season is upon us, and we've begun preparing 1040s. The tax organizer packages have all gone out in the mail (they were mailed between 1/11th and 1/15th). If you haven't received yours, please contact Kristy (ext. 10) or Peggy (ext. 19) and they can get you a replacement package.
If you know someone that could benefit from our service, please let us know. We'll send them an organizer package to help them get their tax papers in order, and review their 2008 return to make sure that they took advantage of all available deductions and credits. The best candidates to send our way are people who've experienced a "life-changing" event, such as; moved to a new home, changed jobs, a loved-one passed away, started a new business, began consulting from home to augment their regular income.
And if your referral becomes our client, you will be entered in the drawing to win a $500 gift certificate to the store of your choice!
The candy bars are back! Due to popular demand, we've reinstated our Payday/Crunch bar give away. If you're entitled to a refund on your return, you'll get a Payday bar - if you owe money, a Crunch bar. So even if you have to pay the IRS, the chocolate should help ease the pain.
The articles below include:
- the Haiti Relief Act - contributions made to assist relief efforts in Haiti are deductible on your 2009 tax return, even though the contribution was made in 2010; check the article below for the specifics
- The Progress Perspective - Nick Murray article about the pace of progress
- Energy Efficient Tax Credits - we've discussed this topic in prior e-newsletters, but wanted to remind you about possible tax savings as you're putting together your data for tax preparation
As always, please contact us if you have any questions about these issues, or any concerns you have about taxes or finances.
Bob Rounsfull
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Haiti Relief Act
On 1/22/10, President Obama signed into law "A Bill to Accelerate the Income Tax Benefits for Charitable Cash Contributions for the Relief of Victims of the Earthquake in Haiti" (the Haiti Relief Act).
The Haiti Relief Act allows taxpayers to treat charitable contributions of cash made after 1/11/10 and before 3/1/10 as contributions made on 12/31/09, if the contributions were for the purpose of providing relief to victims in areas affected by the earthquake in Haiti that occurred on 1/12/10.
To qualify for this accelerated deduction:
· You must itemize your deductions for 2009. If claiming the standard deduction in 2009, you are not eligible.
· The donation must be made in cash. This includes contributions made by text message, check, credit card, or debit card.
· The donation must be made specifically for the relief of victims in areas affected by the 1/12/10 earthquake in Haiti.
· The donation must be made after 1/11/10 and before 3/1/10. A check mailed before 3/1/10 will qualify for the 2009 deduction even though the charity doesn't cash it until after that date. Ditto for a contribution charged to a credit card before 3/1/10.
· The donation must be made to a qualified charity and cannot be designated for the benefit of specific individuals or families. Contributions made to foreign organizations generally are not deductible. Information about organizations helping Haitian earthquake victims from agencies such as the U.S. Agency for International Development can be found at www.usaid.gov.
Also, the normal substantiation rules must generally be met. However, for donations of less than $250 made by text message, a telephone bill will meet the recordkeeping requirement if it shows the name of the donee organization, the date of the contribution, and the amount of the contribution. For example, in the case of a charitable contribution made by text message and chargeable to a telephone or wireless account, a bill from the telecommunications company containing the relevant information will satisfy the recordkeeping requirement. For other cash contributions, a bank record, such as a cancelled check, or a receipt from the charity showing the name of the charity and the date and amount of the contribution will generally be required. However, gifts of $250 or more will require additional documentation.
Bottom Line:If you are contemplating making a contribution to help victims of the earthquake in Haiti, you should consider doing so before 3/1/10. That way, during tax time you will have the option of deducting the contribution in either 2009 or 2010, whichever produces the greater tax savings. |
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The Progress Perspective
"(Human flight in a machine) might be evolved by the combined and continuous efforts of mathematicians in from one million to ten million years."
-from an article in The New York Times, October 9, 1903
"We started assembly today."
-from the diary of Orville Wright, October 9, 1903
The world is still emerging from a financial panic and an economic seizure which has few parallels in history, and none in our lifetimes. A global debt bubble metastasized in the single-family home market, and manifested as a whole new generation of mind-bogglingly complex mortgage derivatives, which turned out to be, in Warren Buffett's memorable phrase, "financial weapons of mass destruction." In response to the functional insolvency of the banking system and the total cessation of the credit function, Western governments plunged into deficits of historic proportions. No one can currently imagine how the accretion of public debt can be reversed, and hyperinflation scenarios grow like weeds in the blogosphere as gold makes new record highs (if only in nominal terms).
Even as global economic activity and equity markets continue their remarkable recoveries, this is The Great Gettin'-Up Morning of catastrophism. Equities had essentially no return in the ten years through 2009, and surely the future looks at least equally bleak. Such is the self-hypnosis of extrapolation. Such is the pathology of pessimism.
As the forgoing quotes from the very same day in 1903 suggest, pessimism always misses the key point in human development: not just the continuing miracle of technological progress, but its second derivative-the change in the rate of change.
Powered human flight offers an almost perfect paradigm for this phenomenon. On their fourth and final flight on that historic day in December 1903, the Wrights flew 852 feet in 59 seconds. In 1923, two men flew 2500 miles across the United States nonstop, from Roosevelt Field on Long Island to San Diego. Lindbergh's transatlantic solo flight came in the spring of 1927. Heinkel perfected a turbojet engine in 1939. Yeager rocketed through the sound barrier in 1947, and Crossfield reached Mach 2 in 1953. Sputnik orbited the earth in 1957, and a man walked on the moon in 1969. Any way you graph this progress, you must be struck most forcibly by its exponent.
At any given moment, progress always appears to us linear, when it is in fact always exponential. Thus, there may very well be as much progress in the hard sciences, in information technology and in medicine in the next ten years as took place in all of human history to this point. It is just this progress-and its profound implications for economic growth and returns on equity capital-that the pessimists miss. But they would have to, because otherwise they could not persist in their pessimism.
Innovation compounds apace. Equities may have provided no net return for the ten years through 2009; this is grist for the pessimists' mill. They conveniently ignore the fact that this decade followed the greatest ten years in the history of equities. They even more studiously ignore the fact that, even as equity prices did less than nothing in the most recent decade, the dividend of the S&P 500 doubled. But even this is beside the point, which is that Moore's Law rolled over five times during this allegedly "lost" decade, such that computing power which cost a dollar at the beginning of 2000 costs three cents today.
And thereby hangs yet another tale-of flight, of technology, and of the unquenchable human spirit.
On April 13, those of us who reverence the event will celebrate-and heaven knows, that's the right verb-the fortieth anniversary of the night the Apollo 13 spacecraft, with three astronauts on board, blew up. On that night this year, I suggest we gather our families and friends, and watch Ron Howard's magisterial film Apollo 13.
Aside from the drama itself, look for the moment-about halfway through the film-when the world's foremost space scientists and technologists begin working the problem of how to get those three heroes home alive using slide rules. Because at that point, NASA's mainframe computer is essentially fried; they have asked it for so many calculations that it can no longer respond in time to save the astronauts.
As you watch these scenes, take out your BlackBerry, iPhone, or similar device. And know that the computer embedded in it is a million times smaller, a million times cheaper, and a thousand times more powerful than all the computing power that was available to NASA the night the Apollo 13 blew up.
Over the next quarter century or so-well within the life expectancies of today's retiring baby boomer couple-this billionfold increase in computing power per dollar will happen again. As it does, information technology will solve all our most vexing problems, including but certainly not limited to energy, the environment, poverty and disease.
We realists-a term I prefer to "optimists," though they are in fact synonymous-will invest patiently and persistently in this progress. By doing so, we may enjoy long retirements full of dignity and independence, even as we endow legacies to those we love and must leave behind in the world.
Pessimists will miss it, increasing the chances that they may run out of money in retirement and die destitute and dependent upon their children-all in the illusory quest for "safety."
Welcome to 2010. Just one man's opinion, of course, and no one else is responsible for it. But: I think it's at least possible that this is the first year of the worst decade to be a pessimist in all of human history.
© 2010 Nick Murray. All rights reserved. Reprinted by permission.
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Energy Efficient Tax Credits
If widely fluctuating energy costs and environmental concerns have you looking for ways to go green, here are some tips on how going green can cut energy costs and reap tax saving energy credits. Better yet-all of these tax credits are available against Alternative Minimum Tax (AMT) this year and none of them are subject to any annoying phase out limits designed to prevent higher income taxpayers from benefiting from them. So, just about everyone should be eligible to take advantage of these tax saving credits.
Making Energy Efficient Improvements to Your Home
A great way to cut energy costs and save up to $1,500 in federal income taxes is to make certain energy efficiency improvements to your home. You just need to be sure to pick the right product.
The credit (which is called the nonbusiness energy property credit) you're entitled to equals 30% of what you pay for (a) qualified energy efficiency improvements (such as, certain energy efficient insulation, windows, doors and roofs), and (b) qualified residential energy property (such as, certain energy efficient heat pumps, hot water heaters or boilers, and advanced main air circulating fans) on your principal residence (no vacation homes). Expenditures made from subsidized energy financing can qualify for the credit if they otherwise meet the requirements for those credits. However, there is a $1,500 cap on aggregate credits claimed in 2009 and 2010 for all types of eligible expenditures. In other words, the $1,500 cap applies to the aggregate amount of credits claimed in both years combined.
If there is any possibility you'll be subject to AMT next year, you may want to make these improvements before the year-end. Why? This credit can be used to offset AMT in 2009, but absent Congressional extension, it won't be in 2010.
Note:Basically the same credit existed in 2006 and 2007, but back then it had a $500 lifetime cap. This lifetime cap does not apply (and has no impact on) the credit available in 2009 and 2010. This means you are eligible for the up to $1.500 of nonbusiness energy property credits in 2009-2010, even if you previously claimed $500 of credits on your 2006 and/or 2007 return.
A good place to start your search for products that qualify for this credit is at www.energystar/taxcredits where you'll find a table listing requirements for various products. Then, to ensure the product satisfies the required energy saving conditions for the nonbusiness energy credit, be sure to check the product package materials or manufacturer website before making the purchase. According to the IRS, you can rely on the manufacturer's written certification statement, which is typically included with the product package materials or on the manufacturer's website. You just need to keep a copy of this certification as part of your tax records.
Purchasing a Hybrid Vehicle
If you are considering a hybrid vehicle purchase in 2009, the hybrid vehicle credit of up to $3,400 may be enough to get you going. Thanks to the Stimulus Act, the really good news for 2009 purchases is that the credit is now allowed against AMT. Top this with the fact that the credit has no AGI phase-out limit and you've got a whole new ballgame. But, you need to be careful-the amount of credit available depends on the hybrid you buy and some of the most popular models are no longer eligible for the credit. Also, only purchases of new (not used) vehicles qualify.
The actual credit allowed varies by vehicle. Furthermore, the credit is phased out once a manufacturer sells 60,000 hybrid vehicles. Lexus, Toyota, and Honda all hit this mark in previous years, so no 2009 purchase of their hybrids qualifies for a credit. Ford and Mercury hit this mark in the last quarter of 2008. This means the full credit will be allowed for purchases of their hybrids through 3/31/09, 50% of the credit will be allowed for purchases made from 4/1/09-9/30/09, and 25% of the credit will be available for purchases made from 10/1/09-3/31/10. So, if you're interested in a Ford or Mercury hybrid, you'll want to make the purchase before 10/1/09 to get 50% (rather than 25%) of the credit.
Note:There's also a credit for advanced lean burn technology vehicles, but no one had produced vehicles to which this credit applied until the last half of 2008 when Mercedes and Volkswagen debuted their versions. Since then, BMW and Audi have added vehicles to this list.
Please give us a call if you want to know the available credit amount for a specific vehicle.
Using the Solar, Wind, Geothermal or Fuel Cell Energy to Power Your Home
Although the costs of qualifying expenditures tend to be pretty steep, if you install solar, wind, geothermal, or fuel cell energy saving equipment in 2009, you may be able to take advantage of the residential energy efficient property (REEP) credit. The REEP credit equals 30% of expenditures to install: (1) qualified solar water heating equipment, (2) qualified small wind energy equipment, (3) qualified geothermal heat pumps, (4) qualified solar electricity generation equipment, and (5) qualified fuel cell equipment (up to $1,000 per kilowatt hour). Expenditures made from subsidized energy financing can qualify for the REEP credit if they otherwise meet the requirements for those credits.
The credit only applies to equipment you place in service in your U.S. residence, and it cannot be claimed for equipment used to heat a swimming pool or hot tub. The credit for fuel cell equipment is only available for your principal residence; however, the two solar credits apply to any residence (including vacation homes).
As with the nonbusiness energy property credit, a good place to start your search is at www.energystar.gov/taxcredits. Then, be sure the product satisfies the required energy saving conditions for the REEP credit, be sure to check the product package materials or manufacturer website before making the purchase. According to the IRS, you can rely on the manufacturer's written certification statement, which is typically included with the product package materials or on the manufacturer's website. You just need to keep a copy of this certification as part of your tax records.
Conclusion
As you can see, there are some pretty nice tax savings to be had from making certain energy saving and environmentally friendly expenditures in 2009.
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