Oklahoma Tax Tips

New for 2009 Filings!

First-Time Homebuyers Tax Credit:Last year's Housing Act included a tax credit giving first-time homebuyers up to a $7,500 (actually, $7,500 or 10% of the purchase price, whichever is less) credit for buying a home between April 8, 2008, and July 1, 2009, with single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualifying for the full tax credit. The credit was basically an interest-free loan from the government.

However, with the American Recovery and Reinvestment Act of 2009, Congress beefed up the credit by rescinding the repayment requirement for homes purchased on or after Jan. 1, 2009. The new law also extends the credit to April 30, 2010 and increases the credit from $7,500 to $8,000. However, the new law retains the repayment provisions if the house is sold within three years of the original purchase date. The new law also added a smaller $6,500 credit for individuals buying a new residence that don't qualify as first-time homeowners. This credit is available to people that have owned their current residence for the past five years.

Rule Change for Dependent Claims: For couples who are divorced or separated, determining who claims the children has often been confusing and sometimes depended upon a divorce decree. However, a new ruling supersedes the decree. The new ruling is the overnight rule, meaning whichever custodial parent has the child for the most overnight stays is the parent who claims the deduction.

EITC Thresholds and Tax Law Updates
For tax year 2009, earned income and adjusted gross income (AGI) must each be less than:$43,279 ($48279 married filing jointly) with three or more qualifying children

$40,295 ($45,295 married filing jointly) with two qualifying children;
$35,463 ($40,463 married filing jointly) with one qualifying child;
$13,440 ($18,440 married filing jointly) with no qualifying children.

The maximum credit for tax year 2009 is:

$5657 with three or more qualifying children

$5028 with two qualifying children;
$3,043 with one qualifying child;
$457 with no qualifying children.

Investment income must be $3,100 or less for the year.

The OSCPA offers the following tax tips for you to consider. For more complicated tax issues, you can easily find a CPA in your area.

1. Computers and other equipment used on the job or to monitor your investment portfolio may be tax deductible. Review tax Forms 4562, 2106, and Schedules A and C to see if you qualify for these deductions.
   
   
2. The Earned Income Tax Credit (EITC), sometimes called the Earned Income Credit (EIC), is a refundable federal income tax credit for low-income working individuals and families. Take the Earned Income Tax Credit Certification Test to see if you qualify.
   
   
3. Need more time to prepare your federal tax return? If you are not able to file your federal individual income tax return by the due date, you may be able to get an automatic 6-month extension of time to file. To do so, you must file Form 4868, Application for Automatic Extension of Time to File U.S. Income Tax Return (51K) Adobe PDF, by the due date for filing your calendar year return (usually April 15) or fiscal year return. Special rules exist for those serving in the military. Other rules may apply. Visit the IRS Web site for more information or consult your CPA. Find a CPA now.
   
   
4. Participating in an illegal scheme to avoid paying taxes can result in imprisonment and fines, as well as the repayment of taxes owed with penalties and interest. Education is the best way to avoid the pitfalls of these "too good to be true" tax scams. Ensure the credibility and legality of your tax returns by letting a CPA help you prepare your returns. Find a CPA now.
   
   
5. If you were looking for employment last year, check Form 2106 and Schedule A to see if some of your job seeking expenses are tax deductible. Costs for agency fees, resume prep, interview travel, lodging and part of your meals qualify, as well as fees for psychological testing and career counseling.
   
   
6. The Educators' Deduction is available to eligible educators in public or private elementary or secondary schools. To be eligible, a person must work at least 900 hours during a school year as a teacher, instructor, counselor, principal or aide. An educator may subtract up to $250 of qualified out-of-pocket expenses when figuring adjusted gross income (AGI). This deduction is available whether or not the taxpayer itemizes deductions on Schedule A.
   
   
7. If you are filing a federal income tax return on paper, use the simplest form you can, the IRS advises. The simpler the form, the less chance of an error that may cost you money or delay the processing of your return. The simplest is Form 1040EZ. Form 1040A covers several additional items not addressed by the EZ. Form 1040 should be used when itemizing deductions and reporting more complex investments and other income.
   
   
8. Even individuals who don't earn enough to be required to file a tax return may be eligible for an earned income credit. Some individuals who do not have a qualifying child may also be eligible for a credit. However, you must file a return to receive the Earned Income Tax Credit. You must also file a return if you received any advance payments of this credit while you worked during the year.
   
   
9. Contributions of cash or property must be made to qualified organizations, such as religious, charitable and educational groups in order to be deductible. The IRS Web site (www.irs.gov) has an exempt organization search feature to help you determine whether an organization qualifies for federal deductions.
   
   
10. If you rent and personally use your vacation home for more than 14 days per year, all rental payments are included in your income, although limited rental expenses may be deducted. You may be able to write off certain rental-related expenses, but only up to the amount of your rental income. Expenses related only to renting, such as advertising and commissions paid to a rental agent, may be fully deducted. Mortgage interest and property taxes, which are deductible whether or not the property is rented, are allocated between rental and personal usage.All other expenses, such as insurance, maintenance and repairs applying to the property itself must be allocated between rental and personal use.
    
    
11. Under current law, a married couple filing a joint return can exclude from income up to $500,000 of gains made on the sale of a principal residence. For a single person, the amount of tax-free gain can be up to $250,000. To be eligible for the exclusion, you and your spouse (if married) must have owned and used your home as your principal residence for at least two of the five years up to the date of the sale. Short, temporary and seasonal absences count as periods of use. If you have more than one residence, only the sale of your principal home qualifies for the exclusion. Special provisions apply if unforeseen events such as job relocation, illness or divorce forces you to sell your home before meeting the residency requirement. Depending on the circumstances, gain may be fully excluded or the exclusion may be prorated based on the amount of time you lived in the house. When determining gain, don't forget to count qualified expenses. They can be added to your home's purchase price, increasing the cost basis on your original house. Increasing your cost basis helps reduce the gain on the sale of your house and may lower or eliminate a potential tax bill. Qualifying expenses include home improvements, such as adding a room or a new roof, and the cost of settlement fees, property inspection fees and title insurance.