Well, we have some new tax laws on the books. Surprise! The biggest piece of the new law that will interest most people is the extension and additions to the homebuyer’s credit. Congress has seen some success with the previous new home buyer’s credit that gave $8,000 to homebuyers that hadn’t owned a home in 3 years. It has been a popular credit and has helped accelerate purchases in the housing market despite recent reports of several cases of fraud. Some economists think the credit and low interest rates have been propping up the housing market and they worry what may happen to the residential real estate market in the coming months since the credit was set to expire on November 30th. So, Congress has extended the credit through April 30th 2010 in an effort to delay any negative effects. Taxpayers can actually claim the credit through June 30th 2010, but a written contract must be in place by April 30th. They have also included a reduced credit of $6,500 to homebuyer’s who have owned and used the same residence as their principal home for 5 consecutives years out of the last 8. The new law also extends the income phase-out limits for claiming the credit to $225,000 for joint filers and $125,000 for singles. It also puts a cap on claiming either credit if the new home costs more than $800,000. In all likely hood, it is probably just delaying a rough time for the housing market, but the delay may be good, since it will give the economy a little more time to get some solid footing on a recovery that may be emerging according to some indicators.
There were a few other changes to existing tax laws as well. Last year, the rules for net operating loss (NOL) deductions were changed to allow taxpayers to carry them back 5 years instead of just 2. Under the new rules, some businesses would see limits to how much NOL they can carry back 5 years.
Do you e-file? Well, if you use a paid preparer after December 31, 2010, your return will probably be e-filed. The new law requires all paid preparers who reasonably expect to file more than 10 returns, to e-file all returns prepared. This is a big departure from where the IRS has been in the past. They have tried to get people to e-file using incentives instead of requirements. In anticipation of this requirement, we e-filed most returns for 2008 and will move toward 100% in 2009 to make the transition as easy as possible for our clients.