1. Making Work Pay Credit (MWPC) and Government Retiree Credit (GRC)
If you have earned income from work, you may be able to take MWPC. It is 6.2% of your earned income but cannot be more than $400(MJ $800). You may be able to take GRC if you get a government pension or annuity. Adult recipients of Social Security, railroad retirement and veterans’ disability or pension benefits plus individuals of any age eligible for SSI benefits receive a one-time Economic Recovery Payment (ERP) of $250. The ERP is not taxable, but it reduces any MWPC or GRC.
2. Deduction for motor vehicle taxes
If you bought a new motor vehicle after 2/16/09, you may be able to deduct any state sales tax on the purchase. If you are not itemizing deductions, the tax increases your standard deduction and is claimed on Schedule L.
3. American Opportunity Credit
The maximum Hope Education Credit has increased to $2,500. The increased credit is now called the American Opportunity Credit. The credit is available for the first 4 years of postsecondary education and 40% of the credit is now refundable for most taxpayers. Qualified expenses include tuition, fees, books, supplies and equipment.
4. First-time Homebuyer Credit (FHC)
If you bought a main home during 1/1/09 – 4/30/10 (6/30/10, if you entered into an escrow before 5/1/10), and did not own a main home during the prior 3 years, you may be able to take this credit. The credit is equal to 10% of the purchase price up to a credit of $8,000. You can choose to claim the credit on your 2009 return for a home you bought in 2010. Effective for purchases made after 11/6/09, a modified credit is available to taxpayers who are long-time residents. A taxpayer who meets certain requirements is treated as a first-time homebuyer subject to all of the rules of the FHC with one modification: the credit is limited to $6,500. A long-time resident is an individual who owned and used a residence as a principal residence for any 5 consecutive year period during the 8 year period ending on the date of purchase of a subsequent principal residence.
5. Unemployment Compensation
You do not have to pay tax on unemployment compensation of up to $2,400 per recipient. Amounts over $2,400 are still taxable.
6. IRA Deduction Expanded and Rollovers to Roth IRAs
You and your spouse, if filing jointly, each may be able to deduct up to $5,000 ($6,000 if
age 50 or older) for the traditional IRA contributions. You can rollover distributions from an eligible retirement plan to a Roth IRA. The rollover is not tax-free, but no penalty. Half of any income that results from a rollover to Roth IRA in 2010 can be included in income in 2011, and the other half in 2012.
7. Tax Free Capital Gains
For tax year 2008-2010, taxpayers will enjoy tax free capital gains and qualified dividends. Taxpayers who can take advantage of this opportunity are those whose taxable income amount – minus qualifying capital gains and dividends – is less than the upper threshold for the 15% marginal tax bracket.
8. Cash for Clunkers
A $3,500 or $4,500 voucher or payment made for such a voucher under the Cash for Clunkers program to buy or lease a new fuel-efficient automobile during 7/1/09-11/1/09 is not taxable.
9. Standard Business Mileage Rate
The 2009 rate for business use of your vehicle is 55.0¢ a mile, and the 2010 rate is 50.0¢. The 2009 rate for use of your vehicle to get medical care or the move is 24.0¢ a mile.
10. 50% Bonus Depreciation and $250,000 Sec 179 Deduction in 2008
Taxpayers are permitted to claim 50% first-year bonus depreciation of qualifying property placed in service in 2009. If luxury autos are acquired and placed in service more that 50% for business in 2009, the regular first year depreciation limit is increased by $8,000. The maximum regular IRC §179 expense deduction is $250,000 in 2009.
11. Net Operating Losses (NOL)
An eligible small business may elect to carry back an NOL 3,4, or 5 years. An eligible small business is one that meets the gross receipts test of 15 million or less. But there is no carry back period for the state tax return.
12. California New Jobs Credit
A New Jobs Tax Credit of $3,000 is available to small businesses with 20 or less employees for each additional net full-time employee hired and employed in California for the years beginning on or after 01/01/09. The total amount of the credit that FTB can allocate may not exceed $400 million, and claims must be made before a statutorily provided cut-off filing date.
13. California Estimated Tax Payment
FTB revised the estimated tax payment percentages. Beginning January 1, 2010, the percentages are now 30 percent, 40 percent, 0, and 30 percent for the first, second, third, and fourth quarter installments. This rule applies for individual and corporation.
14. State Income Tax Audit
Purchasing a motor vehicle that is priced over twice your annual income increases your chances of a state income tax audit.
15. Changes in Ownership of legal entities
Legal entities (partnerships, LLCs, corporations, and trusts) must file Form BOE-100-B with the BOE within 45 days from the earlier of the change in control, the change in ownership, or a written request by the BOE. Beginning 1/1/10, taxpayers who do not file the form within 45 days will be subject to a penalty of 10% of the value.