January 2009

What's New in Taxes

IRS releases inflation-adjusted tax numbers for 2009

1/1/2009 -

The IRS adjusts many tax numbers for inflation each year. Other numbers change as a result of tax law revision. In your tax planning for 2009, take the following changes into account:

* The maximum earnings subject to social security tax increases to $106,800 for 2009. As before, all earned income (wages and self-employment income) is subject to Medicare tax. The social security earnings limit for retirees under full retirement age increases to $14,160. There is no earnings limit for those who have reached full retirement age.

* The top estate tax rate remains at 45%, but the exemption amount increases to $3.5 million for 2009. The annual gift tax exclusion increases to $13,000 per donee.

* The nanny tax threshold increases to $1,700 for 2009. If you pay household workers more than this amount during the year, you're responsible for payroll taxes.

* The kiddie tax threshold increases to $1,900. If your child has more than $1,900 of unearned income in 2009 (e.g., dividends and interest income), the excess could be taxed at your highest rate if your child is under age 19 (under age 24 if the child is a full-time student).

* The first-year business equipment expensing limit goes back to its 2007 amount (as adjusted for inflation). Unless Congress changes this limit (and the expectation is that they will), the limit for 2009 is $133,000. The phase-out level is $530,000.

* The standard mileage rate for business driving in 2009 goes down to 55¢ per mile, and the mileage rate for medical and moving expenses is 24¢ a mile. The general rate for charitable driving remains at 14¢ a mile.

* The adoption credit increases to $12,150 for 2009 adoptions.

There are some changes to the retirement plan contribution limits for 2009. The maximum contribution for an IRA remains at $5,000 for those under age 50, and at $6,000 for those 50 and older. The SIMPLE plan limit increases to $11,500 for individuals under age 50, and to $14,000 for those 50 and older. The 401(k) limit increases to $16,500; those 50 and older can contribute up to $22,000.

For details or for assistance as you begin your 2009 tax planning, give our office a call.
 

For details or for assistance with your tax planning, give our office a call.