·  The seller (builder) must provide you with a certificate that they obtain from the Franchise Tax Board within one week of the purchase.

Making Work Pay Credit:

This year you'll receive a credit of up to $400 ($800 for married filing jointly).  The credit is 6.2% of your earned income with the above maximums.  "Earned income" means W-2 income or self-employment income.  The IRS has already adjusted the withholding tables to account for this credit.


Economic Recovery Payment:

Recipients of Social Security retirement benefits, railroad retirement benefits and veterans' disability or pension benefits plus individuals of any age eligible for SSI benefits will receive a one-time payment of $250.  Any person who was eligible to receive one of those four benefits in November or December of 2008 or January of 2009 will receive the payment.  The government will start issuing the checks no later than June 17, 2009.  The exact date has not been announced.  No action of any kind is required on the part of an eligible recipient.


Government Retiree Credit:

Certain government retirees will receive their own version of the $250 Economic Recovery Payment.  However, this credit will not be sent to the recipient; it will be claimed on the 2009 tax return.  Any former federal, state, or local government employee is eligible if their salary during their employment years wasn't treated as employment for FICA purposes.  No individual can get both the Government Retiree Credit and an Economic Recovery Payment.


California tax rates increase:

The 2009 California tax rates will increase from 1% - 9.3% to 1.25% - 10.55% (or 1.125% - 10.415% if federal stimulus money is high enough).  Prepare for withholding to increase and you may have to increase your estimated tax payments.  (Don't forget, California adds another 1% tax on income in excess of $1 million.)  Business rates remain the same.


Sales tax deduction on new cars:

You may receive a deduction for sales taxes paid on the purchase of a new car for purchases made on or after February 17, 2009, and no later than December 31, 2009.  Passenger autos, light trucks, motorcycles, and motor homes qualify.  The deduction is available even for taxpayers who don't itemize.  The deduction is reduced for taxpayers with incomes over $125,000 and eliminated for incomes over $135,000 ($250,000 and $260,000 on a joint return).


California sales tax increase:

On April 1, 2009, your sales tax rate will increase by 1%.  Therefore, you may want to to make any major purchases before April 1.  The difference in sales tax on a $50,000 car is $500.


California car tax increase:

The California DMV fee will increase on May 19, 2009.  The rate goes from 0.65% of the value of the automobile to 1.15%.  If you purchase a $50,000 automobile after May 19, your DMV fee will increase by $250 ($575 - $325).


Exclusion for unemployment compensation:

You will be able to exclude up to $2,400 of unemployment compensation in 2009.


Hope credit enhanced:

If you or your child pays college tuition and fees in 2009, the Hope Credit has been improved in a number of ways.  Most significantly, the income limitations have been increased substantially.  If you were unable to take the credit in prior years because of the income limitations, you may have a better shot at it in 2009.


Child Credits Increased:

Both the refundable Child Tax Credit and the Earned Income Credit have been increased substantially for certain taxpayers.


Residential Energy Credits Enhanced:

Credits for making energy-efficient improvements to your home have been greatly increased.  The credits apply to such improvements as solar water heaters, geothermal heat pumps, and energy-efficient windows, among others.


Bonus Depreciation and §179 Expensing Extended One Year:
 
For purchases of plant and equipment used in a business, the accelerated depreciation rules have been extended for an additional year.


New California Credit:
 
California has added new credits for increasing the number of full-time employees.  The credit is $3,000 per qualified employee if the total full-time employees increase over the prior year.  The credit only applies to businesses with fewer than 20 employees.

DZH Phillips LLP is one of the leading public accounting and strategic consulting firms in the San Francisco Bay Area.  We provide the long-term relationships, industry expertise, and consistently high-quality service our clients need to make the right decisions today and in the future.