Recession brings changes in year-end tax planning

Dallas Morning News

DALLAS — Year-end tax planning this year will be different from years past, largely because of the recession. For many taxpayers, the year has meant a job loss, a job with less income or perhaps a home foreclosure.

There also have been government- stimulus programs that have added to taxpayers’ take-home pay or given some home buyers a tax credit. All these need to be taken into account.

“Things are different this year for a lot of people in situations they’ve never been into before because of the economic times,” said Jimmy Averitt, tax partner at accounting firm BDO Seidman LLP in Dallas.

Generally, if you owe a debt to someone and they cancel or forgive that debt, the canceled amount may be taxable.

However, the government offers a tax break to help homeowners who lost their home to foreclosure. Under the law, a taxpayer whose principal residence was foreclosed on does not have to claim the amount of debt canceled as income.

Debt reduced through a loan modification also is exempt. A loan modification makes mortgage payments more affordable by reducing the interest rate or lengthening the term of a mortgage.

If you’ve been laid off, your taxable income could “well be significantly lower when you start taking into account exclusions and dependency deductions,” Averitt said.

That could leave you in a situation where your tax deductions exceed your income.

If you’ve been collecting unemployment, know that for 2009, the first $2,400 of unemployment compensation is excluded from tax. All unemployment compensation beyond the first $2,400 is taxable.

If you’re hunting for a job, keep track of the miles you drive, fees you pay for parking or tolls, employment agency fees, r sum -preparation fees, long-distance calls, etc. You may be able to claim these expenses on your tax return.

The larger paycheck you received tied to the Obama stimulus plan could end up taking a bite out of your federal income-tax refund, or even leave you owing taxes, observers says.

Congress has expanded and extended until April 30 a popular credit for first-time home buyers. The $8,000 tax credit would have expired Nov. 30.

If you buy a new vehicle by Dec. 31, you can deduct state and local sales taxes paid on up to $49,500 of the purchase price, whether you itemize or not.