Grace + Kate

This is fashion-unrelated. They say there are two things people can’t avoid – death and taxes. Sad but true, even fashionistas have to worry about taxes. In addition to bags, shoes and clothes, you might have been shopping for a car, house, job or college education this past year. The 2009 tax filing deadline is not until April 15, 2010 but the end of 2009 is quickly approaching.

Top 10 new tax-saving opportunities for 2009 via Ameriprise

In a major effort to stimulate the economy, the federal government enacted — and expanded — a number of tax-saving laws during 2009. Don’t miss the chance to save on your taxes.

Real estate

1. Homebuyer credits. With the signing of the Worker, Homeownership and Business Assistance Act of 2009, President Obama extended and expanded the homebuyer tax credits.

• First-time homebuyers. Qualifying first-time homebuyers (they or their spouses have not owned a home during the three years prior to purchase) who purchase a home on or after January 1, 2009 through April 30, 2010 (June 30, 2010 if under binding contract by April 30, 2010) may be eligible for a tax credit of 10% of the purchase price, up to a maximum credit of $8,000.
• Existing homebuyers. Qualifying existing homeowners who have owned and lived in a principal residence for at least five consecutive years (during the eight years prior to purchase) may qualify for a tax credit for the purchase of a different principal residence. The tax credit is 10% of the purchase price, up to a maximum credit of $6,500, under the same income restriction, and schedule as first-time homebuyers.
• Homebuyers in the military. Members of the military, who meet certain requirements and serve outside the United States for at least 90 days between December 31, 2008 and May 1, 2010, generally have until April 30, 2011 to take advantage of the homebuyer credits (June 30, 2011 if under qualifying binding contract).
• Some restrictions may apply. To qualify for the credit, purchased homes must be used as the purchaser’s principal residence for at least 36 months (vacation homes are not eligible). For purchases after November 6, 2009, the income thresholds for phasing out the credits have been raised to $125,000 for individuals and $225,000 for couples filing jointly (from $75,000 and $150,000 respectively). Additionally, homes purchased after November 6, 2009 must be purchased for $800,000 or less and purchased by someone at least age 18 (generally) who may not be claimed as a dependent by another taxpayer. Generally, homes must be purchased from someone “unrelated” to the buyer (or, after November 6, 2009, the buyer’s spouse). Other restrictions apply; see your tax advisor for details.

Education

2. Tuition. The American Opportunity Tax credit, also known as the Hope education credit, has increased from $1,800 to a maximum of $2,500 for qualified tuition and related expenses incurred in 2009 and 2010. It can now be claimed for the first four years rather than two and has been expanded to include expenses for books, supplies and equipment.

3. Computers. You may now, without penalty, use assets in a 529 plan to purchase computers in 2009 and 2010 for educational use.

Energy

4. Energy-efficient home improvements and products.

• Energy-efficient home improvements. Tax credit of 30% of the cost, up to $1,500 aggregate credit for 2009 and 2010, for insulation, energy-efficient exterior windows and heating and air conditioning systems.
• Residential alternative energy products. Tax credit for 30% of the cost of alternative energy equipment such as solar hot water heaters, geothermal heat pumps and wind turbines.
• Tax credits for businesses. Manufacturers that produce certain energy-efficient appliances are eligible for federal income tax credits which could indirectly reduce the cost of energy-efficient appliances.

5. Hybrid vehicles. Since 2005, there has been a tax credit for the purchase of a hybrid car or SUV. During 2009, buyers can receive a credit of up to $3,000, depending on a phase-out that varies by manufacturer. In 2010, there will also be a new credit for up to $7,500 for the purchase of a plug-in electric drive vehicle.

Job transition

6. Unemployment compensation. The first $2,400 of unemployment benefits an individual receives in 2009 is tax-free.

Retirement

7. RMD waiver. For the 2009 tax year only, required minimum distributions are waived.

8. Roth IRA conversion. If you are above the income threshold to contribute to a Roth IRA this year, you can make a non-deductible IRA contribution during 2009 and convert it to a Roth during 2010, when the income limitation for Roth conversions is no longer in effect. If you have other pre-tax IRA assets special tax rules apply to this strategy, so talk to your financial advisor and tax professional.

Small business

9. Small business stock. Investors in qualified small business stock purchased after February 17, 2009 through December 31, 2010 who hold their investments for more than five years can exclude from taxation 75% of the capital gains upon sale or exchange.

Transportation

10. New vehicles. Receive a deduction for state and local sales and excise taxes when you purchase a new car, light truck, motor home or motorcycle on or after February 17, 2009 through December 31, 2009.

Make sure you don’t miss out on these and other tax opportunities. Talk to both your financial and tax advisors.