1. © 2010 American Institute of Certified Public Accountants, Inc.

2. Select 2009 Tax-Law Changes Wide ranging tax-law changes in 2009: – Credits for employees and undergraduate students – Tax breaks for first-time homeowners – Help for the unemployed – And many other changes 2 © 2010 American Institute of Certified Public Accountants, Inc.

3. First-Time Homebuyer’s Credit Increased to $8,000 Required purchase periods First-time homebuyer requirement Different phase-out ranges Credit repayment under certain circumstances Includes Long-Time Resident Credit 3 © 2010 American Institute of Certified Public Accountants, Inc.

4. Mortgage Debt Cancellation Mortgage liability post-foreclosure Tax-free debt discharge on/after January 1, 2007 and before January 1, 2013 Primary resident requirement $2 million debt limit ($1 million if married filing separately) 4 © 2010 American Institute of Certified Public Accountants, Inc.

5. Unemployment Compensation Generally fully taxed First $2,400 not taxed for 2009 5 © 2010 American Institute of Certified Public Accountants, Inc.

6. Making Work Pay Credit 6.2% of income earned, up to $400 tax credit ($800 if married filing jointly) Phase-out range*: $75,000 to $95,000 (single filer) and $150,000 to $190,000 (married filing jointly) Received through reduction in employee withholding and estimated tax payments Special situation: both spouses employed and had withholdings adjusted 6 *Pertains to MAGI © 2010 American Institute of Certified Public Accountants, Inc.

7. Economic Recovery Payments One-time, tax-free $250 payment November 2008, December 2008 and January 2009 eligibility requirement Making Work Pay Credit offset Exceptions apply Possible tax liability 7 © 2010 American Institute of Certified Public Accountants, Inc.

8. COBRA Premium Assistance 65% premium federal government subsidy September 1, 2008 to February 28, 2010 termination period Fifteen-month availability Tax-free feature phase out* – $125,000 to $145,000 (single filers) – $250,000 to $290,000 (joint filers) Other options available 8 *Pertains to MAGI © 2010 American Institute of Certified Public Accountants, Inc.

9. Health Coverage Tax Credit 9 Eligibility requirements 65% and 80% credit — depending on time period Two ways to claim credit 2011 expiration © 2010 American Institute of Certified Public Accountants, Inc.

10. American Opportunity Tax Credit Replaces Hope Scholarship Credit Applies to first four years of college/ postsecondary school $2,500 per student per year Expanded “qualified tuition and related expenses” Phase-out ranges* – $160,000 to $180,00 (married filing jointly) – $80,000 to $90,000 (other filers) Allowed against AMT 10 *Pertains to MAGI © 2010 American Institute of Certified Public Accountants, Inc.

11. 11 AMT Patch AMT Triggers Higher-than-average dependency exemptions Large deductions for state and local income taxes Higher real estate taxes High miscellaneous itemized deductions and medical expenses © 2010 American Institute of Certified Public Accountants, Inc.

12. 12 AMT Exemption Amounts Single/Head of Household$46,700 Married/Joint/Qualifying Widow(er)$70,950 Married/Filing Separately$35,475 © 2010 American Institute of Certified Public Accountants, Inc.

13. 13 New Energy Incentives Nonbusiness Energy Property Credit Residential Energy Efficient Property Credit Four credits for energy-efficient vehicles Hybrid and electric vehicles; restrictions apply © 2010 American Institute of Certified Public Accountants, Inc.

14. 14 Child Tax Credit $1,000 credit per qualifying child Child must be under age 17 (end of calendar year) Child must be claimed as a dependent Child must be a U.S. citizen or resident Phase out for higher-income families Enhanced or Additional Child Tax Credit © 2010 American Institute of Certified Public Accountants, Inc.

15. 15 The Basics Filing Status Tax Rates Standard Deduction Standard Deduction Additions Itemizing Deductions Personal Exemptions Charitable Deductions © 2010 American Institute of Certified Public Accountants, Inc.

16. 16 Filing Status Single Married Filing Jointly Married Filing Separately Head of Household Qualifying Widow(er) © 2010 American Institute of Certified Public Accountants, Inc.

17. 17 2009 Tax Rates 10% 15% 25% 28% 33% 35% © 2010 American Institute of Certified Public Accountants, Inc.

18. 18 Standard Deduction Filing StatusStandard Deduction Single$5,700 Married Filing Separately$5,700 Married Filing Jointly$11,400 Qualifying Widow(er)$11,400 Head of Household$8,350 © 2010 American Institute of Certified Public Accountants, Inc.

19. 19 Standard Deduction Additions Taxpayers 65 and older and/or blind get additional standard deduction — $1,100 If also unmarried, no surviving spouse — $1,400 Other additional deductions – State or local real estate taxes – Sales tax on new vehicle purchase State/federal filing requirements © 2010 American Institute of Certified Public Accountants, Inc.

20. 20 Itemizing Deductions Alternative to standard deduction Use when total deductions exceed standard deductions Phase-out rules apply* – Single/Married filing jointly/Head of household - $166,800 – Married filing separately - $83,400 Advance planning reduces tax liability *Pertains to AGI © 2010 American Institute of Certified Public Accountants, Inc.

21. 21 Personal Exemptions Filing StatusPhase Out* Starts Phase Out* Ends Single$166,800$289,300 Married/Joint/Qualifying Widow(er) $250,200$372,700 Married Filing Separately$125,100$186,350 Head of Household$208,500$331,000 *Pertains to AGI © 2010 American Institute of Certified Public Accountants, Inc.

22. 22 Charitable Deductions 50% of AGI deduction Documentation required for monetary donations and some non-monetary donations Donate appreciated property and avoid capital gains tax Donations of $250 or more Clothing and household items in good condition © 2010 American Institute of Certified Public Accountants, Inc.

23. 23 Tax Strategies for Life Family Education Home Investments Retirement © 2010 American Institute of Certified Public Accountants, Inc.

24. 24 Family Strategies Kiddie Tax Adoption Credit Dependent Care Credit Earned Income Credit Shifting Income © 2010 American Institute of Certified Public Accountants, Inc.

25. 25 Kiddie Tax Makes income shifting to children less beneficial Applies to – All children under 18 – Most children who are 18 – Most full-time students between 19-23 © 2010 American Institute of Certified Public Accountants, Inc.

26. 26 Adoption Credit Up to $12,150 per eligible child Employer reimbursement up to $12,150 Phase-out rules apply Parents adopting special-needs child — full credit regardless of actual expenses Rules for U.S. and foreign adoptions differ © 2010 American Institute of Certified Public Accountants, Inc.

27. Dependent Care Credit Child must be under age 13 and a dependent 20% to 35% of qualifying expenses (up to $2,100) Up to $3,000 of expenses ($6,000 for two or more dependents) AGI considered Not restricted to children Documentation required 27 © 2010 American Institute of Certified Public Accountants, Inc.

28. 28 Earned Income Credit Family SizeMaximum Credit Three or More Children$5,657 Two Children$5,028 One Child$3,043 No Children$457 © 2010 American Institute of Certified Public Accountants, Inc.

29. 29 Shifting Income Reduces taxes on investment income for college savings Gifts to children (or anyone else) — up to $13,000 without being subject to gift tax Hire your children – First $5,700 earned is tax free – Earned income not subject to Kiddie Tax – File W-2 and other tax forms © 2010 American Institute of Certified Public Accountants, Inc.

30. Education Strategies Tax Credits Lifetime Learning Credit U.S. Savings Bonds Student Loan Deduction Higher Education Tuition Deduction 529 Plans Pre-Paid Tuition Plans Classroom Expense 30 © 2010 American Institute of Certified Public Accountants, Inc.

31. 31 Tax Credits American Opportunity Tax Credit and Lifetime Learning Credit Not available to all taxpayers Restrictions apply © 2010 American Institute of Certified Public Accountants, Inc.

32. Lifetime Learning Credit Worth up to $2,000 per year Applies to undergraduate, graduate and professional degree courses Not limited to any number of years Increase to $4,000 in certain circumstances Phase-out ranges* – $50,000 to $60,000 – $100,000 to $120,000 (joint filers) 32 *Pertains to MAGI © 2010 American Institute of Certified Public Accountants, Inc.

33. 33 U.S. Savings Bonds Tax benefits for qualified higher-education expenses Benefit limited in certain circumstances Phase-out ranges* (interest exclusion) – $104,900 to $134,900 (married filing jointly or qualifying widow/er) – $69,950 to $84,950 (single or head of household) *Pertains to MAGI © 2010 American Institute of Certified Public Accountants, Inc.

34. 34 Student Loan Deduction Deduct up to $2,500 No limit on repayment period length No need to itemize Phase-out range* — $60,000 to $75,000 ($120,000 to $150,000 for joint filers) *Pertains to MAGI © 2010 American Institute of Certified Public Accountants, Inc.

35. 35 Higher Education Tuition Deduction Deduct up to $4,000 (modified AGI does not exceed $65,000; $130,000 if married filing jointly) Deduct up to $2,000 – Phase-out limits apply* $65,000 - $80,000 $130,000 – $160,000 (if married/filing jointly) Barred in certain circumstances *Pertains to MAGI © 2010 American Institute of Certified Public Accountants, Inc.

36. 36 529 Plans Tax-advantaged way to save money for college expenses Money grows tax free Qualified tax-free withdrawals Can be used for gifts from family members © 2010 American Institute of Certified Public Accountants, Inc.

37. 37 Pre-Paid Tuition Plans State-instituted plan Plan inception date and child’s age key factors to amount contributed Tuition costs covered — not room, board or books Tax treatment similar to 529 Plans © 2010 American Institute of Certified Public Accountants, Inc.

38. Classroom Expense Deduction for out-of-pocket classroom expenses Worth up to $250 38 © 2010 American Institute of Certified Public Accountants, Inc.

39. 39 Homeowner Strategies Deductions Selling Your Home Long-Time Resident Credit © 2010 American Institute of Certified Public Accountants, Inc.

40. 40 Deductions Interest deductible on – Up to $1 million ($500,000 if married filing separately) of home-acquisition loans – Up to $100,000 ($50,000 if married filing separately) of home-equity loan or line of credit No restrictions on use of proceeds Two types of points deductions Real estate taxes © 2010 American Institute of Certified Public Accountants, Inc.

41. 41 Selling Your Home Exclude up to $250,000 in capital gains; $500,000 if married and filing jointly or surviving spouse in certain cases Home owned/used as principal residence at least two of five years preceding sale Special exceptions available Available once every two years © 2010 American Institute of Certified Public Accountants, Inc.

42. Long-Time Resident Credit Long-time ownership/residency and purchase- period requirements Lesser of $6,500 ($3,250 if married filing separately) or 10% of purchase price $800,000 purchase-price limit Age requirement in certain circumstances 42 © 2010 American Institute of Certified Public Accountants, Inc.

43. 43 Investment Strategies Dividends Capital Gains Tax Offset Capital Gains with Losses © 2010 American Institute of Certified Public Accountants, Inc.

44. 44 Dividends Top tax rate of 15% for qualifying dividends 0% for taxpayers in 10% or 15% brackets Tax rates subject to review Check ex-dividend date Does not apply to interest payments Do not let tax considerations drive investment decisions © 2010 American Institute of Certified Public Accountants, Inc.

45. 45 Capital Gains Tax Maximum tax rate on long-term gains is 15% 0% for taxpayers in 10% or 15% brackets Asset must be held more than one year 28% maximum tax rate for collectibles © 2010 American Institute of Certified Public Accountants, Inc.

46. 46 Offset Capital Gains with Losses Capital losses offset capital gains $3,000 ($1,500 if married filing separately) in net capital losses can be deducted against ordinary income or total net losses Keep track of losses – unused, and short- and long-term Beware of wash sale rule © 2010 American Institute of Certified Public Accountants, Inc.

47. 47 Retirement Strategies Employer-Sponsored Plans IRAs Traditional IRA to Roth IRA © 2010 American Institute of Certified Public Accountants, Inc.

48. 48 Employer-Sponsored Plans Pre-tax contributions help reduce tax bill Employer matches $16,500 maximum contribution (under age 50) $5,500 additional “catch-up” contribution (age 50 or older) No minimum distribution requirement © 2010 American Institute of Certified Public Accountants, Inc.

49. 49 Individual Retirement Accounts (IRAs) $5,000 maximum contribution $1,000 additional “catch-up” contribution (age 50 or older) Two types: traditional and Roth Phase-out rules apply Open/contribution deadline: April 15, 2010 © 2010 American Institute of Certified Public Accountants, Inc.

50. Traditional IRA to Roth IRA Money grows tax free No limit on conversion amount Modified AGI and filing requirements 50 © 2010 American Institute of Certified Public Accountants, Inc.

51. 51 Key Takeaways Follow CPA’s advice Don’t wait until it’s too late Plan for tax savings year-round © 2010 American Institute of Certified Public Accountants, Inc.

52. Thank you. 52 © 2010 American Institute of Certified Public Accountants, Inc.