By Robert L. Moshman, Esq.
TEMPORARY RULES & TAX BREAKS
There are several tax breaks and financial rules with deadlines that will expire.
FDIC INSURANCE LIMITS: Depositors should be wary of taking FDIC insurance coverage at $250,000 for granted. That level of coverage had been $100,000 and was raised temporarily to $250.000. This is set to expire on December 31, 2009. Would there be strong reason to reassure depositors by extending and making permanent such insurance coverage? Sure. Will it happen on time? Don't count your chickens until they hatch. Joint accounts currently get coverage of $250,000 per owner. Trust accounts can have $250,000 per owner beneficiary. Adding co-owners to accounts and other strategies can be implemented to maintain FDIC coverage if we revert to the former limits in 2010.
FIRST HOME TAX CREDIT: The new stimulus package includes a tax credit for persons buying their first home on or between January 1, 2009 and November 30, 2009. This is worth up to $8,000 and does not have to be repaid. Other rules apply.
MORTGAGE FORGIVENESS TAX BREAK: Normally, if a lender forgives debt, the amount forgiven would be included as taxable income of the debtor. In the case of homeowner who can't pay the mortgage and makes a short sale deal where the bank accepts the proceeds of the home in lieu of the full mortgage, the homeowner catches a mortgage break but is losing his or her home. The federal government will stop adding insult to injury, at least temporarily. Under the Mortgage Forgiveness Debt Relief Act of 2007, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was $2 million or less. The limit is $1 million for a married person filing a separate return. Details are on IRS Form 982. The break applied for debts discharged from January 1, 2007 to December 31, 2009.
THE TAXMAN COMETH: Not only Uncle Sam is short on tax revenues these days, so are states and counties and cities. New York is considering a temporary surtax on those earning in excess of $300,000. Other states can expect state income tax and local property tax increases. Higher capital gains rates may lie just ahead as well. Shifting income among family members, among state jurisdictions, and from one tax year to the next can be considered.
PENSION RMD HOLIDAY: Required minimum distributions for 2008 really hurt. A plan participant or IRA owner being forced to liquidate assets had various rotten choices such as incurring capital gains or selling positions at the bottom of the market. RMDs for 2009 can be waived under a new provision enacted in December. As a result, plan participants can elect to skip the 2009 RMD. The next mandatory RMD would be for 2010. Note: The deadline for taking this RMD is December 31, 2010, not April 1, 2011.
TEMPORARY RULES & TAX BREAKS
There are several tax breaks and financial rules with deadlines that will expire.
FDIC INSURANCE LIMITS: Depositors should be wary of taking FDIC insurance coverage at $250,000 for granted. That level of coverage had been $100,000 and was raised temporarily to $250.000. This is set to expire on December 31, 2009. Would there be strong reason to reassure depositors by extending and making permanent such insurance coverage? Sure. Will it happen on time? Don't count your chickens until they hatch. Joint accounts currently get coverage of $250,000 per owner. Trust accounts can have $250,000 per owner beneficiary. Adding co-owners to accounts and other strategies can be implemented to maintain FDIC coverage if we revert to the former limits in 2010.
FIRST HOME TAX CREDIT: The new stimulus package includes a tax credit for persons buying their first home on or between January 1, 2009 and November 30, 2009. This is worth up to $8,000 and does not have to be repaid. Other rules apply.
MORTGAGE FORGIVENESS TAX BREAK: Normally, if a lender forgives debt, the amount forgiven would be included as taxable income of the debtor. In the case of homeowner who can't pay the mortgage and makes a short sale deal where the bank accepts the proceeds of the home in lieu of the full mortgage, the homeowner catches a mortgage break but is losing his or her home. The federal government will stop adding insult to injury, at least temporarily. Under the Mortgage Forgiveness Debt Relief Act of 2007, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was $2 million or less. The limit is $1 million for a married person filing a separate return. Details are on IRS Form 982. The break applied for debts discharged from January 1, 2007 to December 31, 2009.
THE TAXMAN COMETH: Not only Uncle Sam is short on tax revenues these days, so are states and counties and cities. New York is considering a temporary surtax on those earning in excess of $300,000. Other states can expect state income tax and local property tax increases. Higher capital gains rates may lie just ahead as well. Shifting income among family members, among state jurisdictions, and from one tax year to the next can be considered.
PENSION RMD HOLIDAY: Required minimum distributions for 2008 really hurt. A plan participant or IRA owner being forced to liquidate assets had various rotten choices such as incurring capital gains or selling positions at the bottom of the market. RMDs for 2009 can be waived under a new provision enacted in December. As a result, plan participants can elect to skip the 2009 RMD. The next mandatory RMD would be for 2010. Note: The deadline for taking this RMD is December 31, 2010, not April 1, 2011.
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