Tax Updates

Make a Tax Payment:

TAX		Taxable	Income
TABLE	Tax Rate	Over	Up to	PERSONAL EXEMPTION:	$3,650
	10%	$-	$16,700
Married	15%	$16,700	$67,900	STANDARD DEDUCTIONS:
Filing	25%	$67,900	$137,050	Married Filing Joint	$11,400
Joint	28%	$137,050	$208,850	Single and Married Filing Separately	$5,700
	33%	$208,850	$372,950	Head of Household	$8,350
	35%	$372,950	no limit
	Tax Rate	Over	Up to	RETIREMENT PLAN CONTRIBUTIONS:
	10%	$-	$8,350
	15%	$8,350	$33,950	Traditional and Roth IRA Contribution	$5,000
Single	25%	$33,950	$82,250	Catch Up Contribution for Age 50 and Older	$1,000
	28%	$82,250	$171,550
	33%	$171,550	$372,950	Simple IRA	$11,500
	35%	$372,950	no limit	Catch Up Contribution for Age 50 and Older	$2,500
	Tax Rate	Over	Up to
	10%	$-	$11,950	SEP IRA	$49,000
	15%	$11,950	$45,500	(Maximum Compensation Considered)	$245,000
Head	25%	$45,500	$117,450
Of	28%	$117,450	$190,200	401K / 403(b) / Section 457 Plans	$16,500
Household	33%	$190,200	$372,950	Catch Up Contribution for Age 50 and Older	$5,500
	35%	$372,950	no limit



Health Savings Account Contribution Limits:
Single Coverage (minimum deductible-$1,150)	$3,000
Family Coverage (minimum deductible-$2,300)	$5,950

Personal Exemption Phaseout:	Reduced by .67% for each $2,500 of AGI exceeding:
Married Filing Joint	$250,200
Single	$166,800
Head of Household	$208,500

Itemized Deduction Phaseout:

If AGI exceeds $166,800, itemizations are reduced by 1% of the excess. Itemizations cannot be reduced below 80%.


Social Security Wage Base:	$106,800
Earnings Cap to Avoid Reduced Social Security Benefits for Early Retirees Before Year of Full Retirement Age is Met:	$14,160
Earnings Cap to Avoid Reduced Social Security Benefits for Early Retirees in Year Full Retirement Age is Met:	$37,680

FEDERAL TAX UPDATES:

No Penalty for Skipping Required Minimum Distribution in 2009

Mileage Deduction Rates

Credit For Energy Efficient Home Improvements

First Time Home-Buyer Credit

Taxable Unemployment Benefits Reduced

New and Improved Education Credit

Deduction for Sales Tax Paid on Purchase of New Vehicle

Qualified Section 529 Distributions Expanded

The Making Work Pay Tax Credit

Section 179 Depreciation and Bonus Depreciation

Deduction for Real Estate Taxes Paid

Foreclosure Relief

Capital Gain Exclusion on Vacation or Rental Property Conversions

Deduction for Private Mortgage Insurance

WISCONSIN TAX UPDATES:

$5,000 Subtraction for Certain Retirement Benefits

New Marginal Tax Bracket for High Incomers

Capital Gains Exclusion Reduced

Domestic Production Activities Deduction Eliminated

Minnesota Ends Reciprocity Agreement with Wisconsin

2010 IRA Conversions May Be Subject to Early Distribution Penalty

2009 FEDERAL TAX UPDATES

No Penalty For Skipping Required Minimum Distribution in 2009: Generally, taxpayers age 70 1/2 or older are required to take minimum distributions from their retirement plans or a penalty will be incurred. Due to market conditions, the Treasury has decided to waive this penalty in 2009. Keep in mind, if you reached age 70 1/2 in 2008 and chose to defer your RMD to 2009 (no later than April 1st, 2009), you are still required to take the RMD for 2008 in 2009. You need not take the 2009 RMD.

Mileage Deduction Rates:

Business Miles	55.0 cents per mile
Charitable Contribution:	14.0 cents per mile
Medical Travel & Moving	24.0 cents per mile

Credit for Energy Efficient Home Improvements: Please click here for additional information on qualifying property and credit limitations.

First Time Home-Buyer Credit: The "Worker, Homeownership, and Business Assistance Act of 2009" has extended the $8,000 First-Time Homebuyer Credit through April 30th, 2010. For those unable to close by this date, assuming you have entered into a binding contract as of April 30th, 2010, you may still qualify for the credit assuming you are able to close by June 30th, 2010. A new $6,500 credit has also been added for homeowners who have resided in their current residence for 5 consecutive years in the last 8 year period, and have purchased a new principal residence after November 6th, 2009 and on or before April 30th, 2010 (or June 30th, 2010 assuming a binding contract was entered into by April 30th, 2010). Please click here for additional information.

Taxable Unemployment Benefits Reduced: In 2009, the first $2,400 of unemployment benefits will not be subject to income tax. Unemployment benefits have also been increased by $25 per week and the number of weeks eligible for benefits has been extended.

New and Improved Education Credit: The American Opportunity Tax Credit is a modified Hope Credit. The maximum credit will be $2,500, of which 40% will be refundable. This credit can be claimed for the first four years of higher education. The income phase out limits for this new credit are significantly higher than under the old credit, making it available to higher income taxpayers.

Deduction for Sales Tax Paid on Purchase of New Vehicle: If you purchase a new vehicle after February 16th, 2009, a tax deduction for the sales tax paid will be available even if you do not itemize deductions on your tax return. The deduction is available for new vehicles and based on a cost of $49,500 or less per vehicle. This deduction is phased out for higher income taxpayers.

Qualified Section 529 Distributions Expanded: Funds from a Section 529 plan can now be used to purchase computers and related equipment for higher education purposes.

The Making Work Pay Tax Credit: This credit will be a maximum of $400 for working individuals and $800 for working married couples. Individuals who receive social security benefits have been sent a check for $250. An additional $150 may be available to social security recipients if also employed. Working individuals receive this credit thru reduced withholdings (increased paychecks). Self employed individuals will figure the credit directly on their income tax return. Take caution if you have multiple employers. It is possible that you will owe on your 2009 income tax return due to insufficient withholding, whereas normally you would receive a refund. Please contact our office if you need assistance in determining your potential tax liability.

Section 179 Depreciation and Bonus Depreciation: The maximum Section 179 deduction remains at $250,000 for tax year 2009. 50% Bonus depreciation also remains for 2009, however this is set to expire December 31st, 2009.

Above the Line Deduction for Real Estate Taxes Paid: For tax years 2008 and 2009, single taxpayers who do not itemize may be able to claim a deduction of up to $500 ($1,000 if married filing joint) for real estate taxes paid on the taxpayer's principal residence.

Foreclosure Relief: For tax years 2007, 2008, and 2009, up to $2 million of debt forgiven on the foreclosure one's primary residence is eligible to be excluded from taxable income. The debt forgiven that is excluded from income will reduce the taxpayer's basis in the property. This could result in a capital gain if the gain on the foreclosure exceeds the section 121 exclusion limits ($250,000 for single filers and $500,000 for married filing joint.

Capital Gain Exclusion On Vacation and Rental Property Conversions: Under current tax laws, when a vacation or rental property is converted to a principal residence and later sold, a portion of the gain on sale may be subject to tax even if the taxpayer would otherwise qualify under the Section 121 Exclusion. The amount subject to tax is based on the fraction of time after 2008 that the property was used as a vacation or rental property over the total time the property has been owned by the taxpayer. For example, assume a taxpayer purchased a vacation home in the year 2001, converted the property to a principal residence in 2011, and sold the property in 2015. The percentage of gain subject to tax will be 13.3% (2/15). Under previous law, a taxpayer would have qualified for the full Section 121 Exclusion as long as he/she lived in the property for 2 of the last 5 years.

Deduction For Private Mortgage Insurance (PMI): The itemized deduction for PMI will be extended thru 2010. To qualify for the deduction, the purchase or refinance of a primary or 2nd residence giving rise to the PMI must have occurred after January 1st, 2007. The deduction is phased out for taxpayers with Adjusted Gross Income (AGI) exceeding $100,000. The deduction is reduced by 10% for every $1,000 above $100,000. The deduction is completely phased out when AGI exceeds $109,000.

2009 WISCONSIN TAX UPDATES

$5,000 Subtraction for Certain Retirement Benefits: Beginning in tax year 2009, up to $5,000 of retirement benefits from a qualified retirement plan or IRA may be subtracted when determining Wisconsin taxable income. To qualify for the subtraction, the following income limitations must be met:

-if your filing status is single, your federal adjusted gross income must be less than $15,000
-if your filing status is married joint, your federal adjusted gross income must be less than $30,000
-if your filing status is married filing separately, your combined adjusted gross incomes must be less than $30,000

New Marginal Tax Bracket for High Incomers: Effective January 1st, 2009, high incomers will be subject to a new marginal tax rate of 7.75%. Previously, the highest marginal rate was 6.75%.

Capital Gains Exclusion Reduced: Effective January 1st, 2009, the new capital gains exclusion percentage will be 30%. Previously, 60% of your qualifying capital gains could be excluded from your Wisconsin taxable income.

Domestic Production Activities Deduction Eliminated: Effective for taxable years beginning on or after January 1st, 2009 the Domestic Production Activities Deduction will no longer apply for Wisconsin.

Minnesota Ends Reciprocity Agreement with Wisconsin: Effective January 1st, 2010, individuals who live in Wisconsin and work in Minnesota will be required to file both a non resident Minnesota income tax return and a Wisconsin income tax return. A tax credit will be available on the Wisconsin return for taxes paid to Minnesota. The four remaining reciprocity states are Illinois, Indiana, Michigan, and Kentucky.

2010 IRA Conversions May Be Subject To Early Distribution Penalty: Because Wisconsin has yet to adopt federal provisions relating to IRA conversions for 2010, those with adjusted gross income exceeding $100,000 will be subject to an early distribution penalty equal to 3.33% of the distribution if under age 59 1/2. Individuals will also be subject to a 2% excess contribution penalty each year until the excess contributions are removed. Income tax on the conversion will be due in full with the 2010 tax return (it cannot be paid with the 2011 and 2012 income tax returns as allowed under federal law).