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Saving reminders for year-end tax planning

For your investment portfolio, now is the time to harvest your capital losses and gains. If you are concerned about another market correction, consider taking profits from this year before year end. You should check the rules for netting short-term gains against your particular losses as short-term gains have higher tax rates. The key is to net your gains against losses you have so there is no capital gain tax to pay.

For charitable contributions made frequently at this time of year, contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2009 count for 2009. This is true even though the credit card is not paid before year end. Checks written and mailed in 2009 and that clear shortly thereafter count for 2009.

The IRA charitable contribution provision created in 2006 is scheduled to expire at the end of 2009. An IRA owner age 70 1/2 or older can directly transfer tax-free up to $100,000 per year to an eligible charity regardless of whether the owner itemizes their deductions.

Additionally, Washington has implemented new tax-saving opportunities this year that can provide tax breaks for 2009. There are breaks like energy credits for homeowners going green, sales or excise tax deductions for new car buyers, expanded child tax credits and earned income tax credits for low to moderate income earners, American opportunity credit for parents and college students, and a first-time homebuyer credit, now extended as well to qualifying current homeowners. The space limit for this article permits only a couple points to be made about two of the new provisions.

First, to stimulate the economy, the Worker, Homeownership, and Business Assistance Act of 2009 extends the deadline of Nov. 6 for the first-time homebuyer credit to five months and expands the eligibility requirements for purchasers. The deadline for a binding contract is extended to April 30. The maximum credit amount remains at $8,000 for a first-time homebuyer. But the new law also provides a “long-time resident” credit of up to $6,500 to those who do not qualify as “first-time homebuyers.” There are income limits that apply as well as not being available to dependents, those buying homes over $800,000, or those under 18 years of age on the date of purchase.

Second, purchases of a new car, light truck, motor home or motorcycle can quality for a special deduction for state and local sales and excise taxes on 2009 returns under the American Recovery & Reinvestment Act of 2009. The deduction is limited to the sales and excise taxes and similar fees paid on up to $49,500 of the purchase price. Those with income over $250,000 are excluded and again there are adjustments for incomes for joint filers with modified adjusted gross incomes between $250,000 and $260,000 and other taxpayers with modified adjusted incomes between $125,000 and $135,000.

Lea Smith Johnson, an FFC investment adviser in Bradenton, can be reached at (941) 755-0975.

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