Tax Issues

Summer, 2009

Dependent children under the age of 19, or if a full-time student, under the age of 24, must pay tax at their parents’ tax rate if their unearned income is over $1,800.  For 2009, the exclusion is raised to $1,900.  This is referred to as the “kiddie tax” and is designed to keep high income taxpayers from shifting unearned income from themselves to their children who are usually in a lower tax bracket.

The use of your personal automobile for business, medical, moving, and/or charitable purposes can provide tax deductions.  You are allowed so many cents per mile based on your usage.

Starting in 2007, husband and wife limited liability companies no longer have to file partnership or Subchapter S tax returns.  To qualify, they both must materially participate in the business and they both must file a Schedule C with their personal tax return.

Beginning in 2008, the maximum expense deduction for the purchase for business equipment has been increased to $250,000.  This amount phases out dollar-for-dollar on equipment purchased in excess of $800,000.

The gift tax exclusion in 2008 was $12,000 and in 2009 is $13,000.  However, you may be in a situation where tuition and/or medical expenses exceed this amount within a calendar year.  As long as the payments are made directly to the educational organization or the health care provider, then the gift exclusion is unlimited.  This exclusion is available without regard to the relationship between the donor and the donee.

Maximum contributions to Traditional IRAs and Roth IRAs:

                                                                         2008                                        2009             

Under Age 50                                               $5,000                                    $5,000

Age 50 and Over                                          $6,000                                    $6,000

Starting in 2009, the maximum contribution will be subject to an annual inflation adjustment.