New Tax Laws

New Tax Laws in 2009—11/07/08

Jeff: A new president, new Congress, big deficits and Congress looking for ways to solve the problem. Since we don't know what Congress will do in 2009, what tax planning should you do before the year ends? Here to discuss these issues is attorney Michael Solomon.

Jeff: It is hard enough to do tax planning before the year end normally, now we probably will see new tax laws in 2009. What should people do?

Mike: There is some planning you can do even in this time of uncertainty. This year the federal capital gains tax rate is 15. Obama has indicated that the he is going to raise the capital gains tax for high income people. The last time capital gains taxes were raised, in 1986, Congress told people in advance, and you had time to sell before the rate when up. However, there is nothing to stop Congress from passing a law say in the spring of 2009 and making it effective January 1, 2009. If you have any capital gains left, you might want to consider taking advantage of the low rates now.

In some situations you can lower your capital gains tax rate to 0%. Here's who qualifies for the 0% rate:

  • married couple with income including the capital gains of less than $65,100
  • single person with income less than $32,550

If you don't qualify, you can give the stock to your children and let them sell the stock. For example, if a single child earns less than $32,550 he may qualify for the 0% bracket. It gets a little complicated. Here is the rule:

  • If the child is 19 or older or if you are still paying for their college if they are 24 or older, they qualify for the 0% rate if they earn under $32,550.
  • If they are younger than 19 or you pay for college and they are younger than 24 only a small portion of the money qualifies for the 0% rate.

Jeff: Are there any other tax tips?

Mike: Jeff, there are dozens—some that are familiar and some not. Here is a list of some tax savings tools:

  • State and local tax deduction. If you itemize your deductions, pay any city or state income taxes or property taxes before year end so you can deduct the taxes.
  • Charitable gifts. Make sure you make your charitable gifts before year end.
  • 401k. If you participate in a 401k, see if you can adjust your contribution as high as you can afford. For 2008 the maximum contribution is $15,500 plus an additional $5000 if you are 50 or over.
  • Tuition. If you are paying for tuition, you may qualify for tax credits or deductions.
  • Sales Tax. Sometimes the sale tax deduction is worth more than the Ohio income tax deduction—especially if you bought a car.

Jeff: Any other tax tips?

Mike: There are a lot, but they are complicated. You should make it a point to sit down with your tax preparer now, before the end of the tax year, to make sure you do the right planning for 2008 and 2009.