Pending Legislation–Be Prepared

Many tax provisions in 2009 have expired and will catch taxpayers by surprise if legislation is not passed to extend the laws into 2010. Here are some tips while we are in limbo:

Tip 1: Keep Sales Tax Receipts for Major Purchases. In 2009 you could opt to deduct either state income taxes OR the state and local general sales taxes paid as an itemized deduction on your Federal Tax Return. This option goes away without an extension. So if you purchase a large item like an automobile make sure to keep the receipt…just in case.

Tip 2: Teachers, Document Your Expenses. The $250 out-of-pocket expense deduction on your taxes is not currently available in 2010 without a law change, but don’t assume it will not occur. Continue to save your receipts.

Tip 3: Save Energy Efficient Purchase Documents. Many of the credits available for purchasing new energy efficient improvements for your home have also expired. But again, save the receipts as many of these provisions may also be extended through 2010.

Tip 4: Don’t plan on Property Tax Standard Deduction. Many taxpayers who did not itemize last year were able to receive an increased Standard Deduction up to $1,000 for Property Tax payments. This provision has not yet been extended into 2010.

Tip 5: Hold off on That Direct IRA Contribution to Charity. The tax-free distribution directly from individual retirement accounts (IRAs) to qualified charities for seniors has not yet been extended through 2010.

Most experts agree that these provisions will be extended into 2010, but until they are all we can do is be prepared.