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Tuition Deduction

For taxpayers who don't qualify for the AOE Tax Credit, there is a deduction allowed for up to $4,000 of tuition and fees paid to an accredited post-secondary school. The deduction is not available to those with an AGI over $80,000 (single)/$160,000 (married).

Estimated Tax Payments — Small Business Owners

For 2009, the “safe harbor” provision for taxpayers in order to avoid underpayment penalties has been expanded. Taxpayers can avoid the penalty if the taxpayer has withheld or makes estimated tax payments totaling 90% of the previous year's tax return. It was 100% under the old law. The taxpayer's AGI must have been less than $500,000 and more than 50% of the gross income on the previous year's return must have come from the small business. This provision doesn't apply to “C” corporations.

Sales vs. Income Tax Deduction

You are allowed to deduct state and local sales taxes paid instead of state and local income taxes if you choose. This would be most beneficial in states with no income taxes, such as Florida and Texas.

Sales Tax Deduction on Vehicles

For vehicles purchased from February 18th through December 31st, 2009, you can deduct state and local sales taxes on the purchase. The vehicle purchase price cannot exceed $49,500. Vehicles with a gross vehicle weight (GVW) that qualify include passenger autos, light trucks, and motorcycles. Motor homes also qualify with no GVW restrictions. You can take this deduction whether you itemize your deductions or not. The deduction phases out for those whose modified AGI is over $125,000 (single)/$250,000 (married).

Additional Standard Deduction

For 2009, an additional standard deduction amount is available to those who pay real estate taxes and who don't itemize. The amount is the lesser of the state and local real estate taxes paid during the year, or $500 (single)/$1,000 (married).

First-time Homebuyer's Credit

This credit was expected to end on November 30, 2009. It allowed those who hadn't owned a home in the U.S. during the previous three-year period prior to buying the home a tax credit equal to 10% of the purchase price up to $8,000. The home had to be purchased (and closed) between January 1, 2009 and November 30, 2009. At press time, Congress was discussing extending and possibly expanding this credit.

These are just some of the deductions and credits available to you and your business. It's not too late to take advantage of many of these ideas. You have until December 31, 2009. Talk to your CPA or tax advisor to discuss your specific situation.

U.S. Treasury Department Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. This article is not intended to be comprehensive in nature and competent professional tax advice should be sought in determining the issues that impact your specific situation.

Michael A. Bohinc is a certified public accountant in Cleveland, OH. He is also a licensed HVAC and plumbing contractor in the State of Ohio. He is a Consult & Coach Partner for the Service Roundtable. He has more than 20 years experience working on business management issues in the HVAC and plumbing industries. Bohinc can be reached at: 440/708-2583, e-mail mbohinc@keepingscorecpa.com.