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June 2009


by Andrew D. Schwartz, CPA

Four years ago, Congress passed the Energy Tax Incentives Act of 2005.  A provision of that Act established a $500 tax credit for energy efficient improvements made to your primary residence.


The pre-2008 rules allowed you to claim a tax credit equal to 10% of the money spent on the installation of certain energy efficient improvements to your principal residence including insulation and exterior windows, doors, and skylights.  You could also take a tax credit for "qualified energy property" including up to $50 spent on circulating fans, $150 on furnaces or hot water boilers, and $300 on heat pumps, water heaters, and central air conditioning. 


The credit only applied for purchases made during 2006 and 2007, and was limited to a lifetime max of $500 per dwelling, with no more than $200 of the credit to be taken for replacement windows.  While other tax breaks included in the Energy Tax Incentives Act of 2005 were subsequently extended, this tax credit expired as originally planned on December 31, 2007.


Renewed and Improved:


The American Recovery and Reinvestment Act of 2009 reinstated and improved this tax credit for two years beginning on January 1, 2009 as follows:

  • Tripled the rate of the credit - from 10% to 30% for 2009 and 2010.

  • Tripled the maximum credit - up to $1,500 per dwelling for qualified expenditures made during 2009 and 2010.

  • Eliminated the cap of $50 to $300 on items such as circulating fans, furnaces, hot water boilers, heat pumps, water heaters, and central air conditioning. 

  • Eliminated the $200 cap on the portion of the tax credit applicable to the installation of energy efficient windows. 

Renewed and Improved Credit for Home Energy Efficient Purchases


Rate of Credit 10% 30%
Maximum Credit Per Dwelling $500 $1,500
Maximum Credit for Windows $200 $1,500
Maximum Credit for Certain Other Items $50-$300 $1,500


Two-Year Replacement Window


The new rules give you through December 31, 2010 to purchase energy efficient improvements for your home and qualify for this tax break.  The maximum credit is now equal to 30% of the first $5,000 spent on high-efficiency heat pumps, air conditioners, and water heaters, or energy-efficient windows, doors, insulation materials, and certain roofs. Starting in 2009, you can also claim the credit for certain types of asphalt roofs and stoves that burn biomass fuel.


Looking for more good news?  Even if you claimed the $500 tax credit a few years back for energy efficient improvements made to your home, you can still claim the full $1,500 tax credit for 2009 and 2010 as long as you make $5,000 worth of qualified energy efficient expenditures during that two year period.


Please note that the new rules did increase the standards for an energy efficient purchase to qualify for this tax credit.  Expect the IRS to issue guidance for manufacturers to certify that their products meet these new standards. 


According to our friends at the IRS in IR-2009-44, "IRS guidance issued before the enactment of ARRA will be modified in the near future to reflect the new energy efficiency standards. In the meantime, homeowners may continue to rely on manufacturers’ certifications that were provided under the old guidance and on Energy Star labels for exterior windows and skylights in determining whether property purchased before June 1, 2009, qualifies for the credit. Manufacturers should not continue to provide certifications for property that fails to meet the new standards."


Renewable Options


Thinking about adding solar, wind, or geothermal capabilities to your home? If so, you should be aware that the 2009 Tax Act also improved the tax credit for purchases of solar electric property, solar water heating property, wind energy property and geothermal heat pump property.  Under the prior rules, the tax credit you could claim for most of these items was capped at $2,000 per dwelling. 


As of January 1, 2009, these limits no longer apply.  Through 2016, you can take a tax credit equal to 30% of your expenditures for qualified solar, wind, or geothermal property.  Plus, you can claim the credit even if you add this energy producing property to a home that is not your primary residence.  According to IRS Notice 2009-41, "a qualifying dwelling unit is a dwelling unit that is located in the United States and is used as a residence by the taxpayer." 


The Light Turned Green


What does green mean to you?  Being environmentally friendly?  Stashing some Ben Franklins in your piggy bank?  Or setting the wheels in motion?


Whatever your definition of green, the clock is ticking for you to benefit from the current tax credit available to individuals who make qualified energy efficient improvements to their home.



According to our friends at the IRS:

Taxpayers who buy a new car or several other types of motor vehicles this year may be entitled to a special tax deduction when they file their 2009 federal tax returns next year. The tax break is part of the American Recovery and Reinvestment Act of 2009.

Here are seven things you should know about this new deduction:

  • State and local sales taxes paid on up to $49,500 of the purchase price of qualifying vehicles are deductible.
  • Qualified motor vehicles generally include new (not used) cars, light trucks, motor homes and motorcycles.
  • Purchases must occur after Feb. 16, 2009, and before Jan. 1, 2010.
  • This deduction can be taken regardless of whether or not you itemize other deductions on your tax return.
  • Taxpayers will claim this deduction when filing their 2009 federal income tax return next year.
  • The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.
  • The deduction may not be taken on 2008 tax returns.

Consumers who are considering buying a new car may find that this tax incentive means there may have never been a better time to buy.  (Editor's note: Thanks but no thanks. I'm sticking with my '98 Jeep Cherokee.)



by Andrew D. Schwartz, CPA

Take a look at the 2010 federal budget, and you'll see that the proposed deficit for the year ended September 30, 2010 is $1.171 trillion on a federal budget of just under $4 trillion.  Even so, the federal government is willing to pay you $44k to implement Electronic Health Records (EHR) within your practice.

Included in the narrative section of the 2010 federal budget called Jumpstarting the Economy and Investing for the Future, President Obama states, "The current, paper-based medical records system that relies on patients’ memory and reporting of their medical history is prone to error, time-consuming, costly, and wasteful. With rigorous privacy standards in place to protect sensitive medical record, we will embark on an effort to computerize all Americans’ health records in five years. This effort will help prevent medical errors, and improve health care quality, and is a necessary step in starting to modernize the American health care system and reduce health care costs."

The American Recovery and Reinvestment Act of 2009 earmarked $19 billion to provide an incentive for healthcare professionals to implement an EHR system.  Based on these rules, you could receive a subsidy from the federal government of up to $44k for "meaningful use" of a certified EHR technology, as follows:

  • $18k for first year of implementation during 2011 or 2012 - decreasing to $15k if first year of implementation is after 2012.
  • $12k for the second year
  • $8k for the third year
  • $4k for the fourth year
  • $2k for the fifth year

Please note that there is a reduced subsidy for professionals who implement EHR in 2013 or 2014.  Wait until 2015 or later, and you won't be eligible for any subsidy.

Actually, starting in 2015, there will be a penalty equal to 1% of your Medicare and Medicaid reimbursements for failure to implement EHR.  The penalty will increase by 1% per year over the following two years - to 2% in 2016 and 3% in 2017.  The Secretary then has the authority to continue decreasing your Medicare and Medicaid reimbursements by 1% per year for each of the next two years if less than 75% of the medical community has implemented EHR. Each year that you don't implement EHR, therefore, could cost you as much as 5% of your Medicare and Medicaid receipts starting in 2019. 

How do you qualify for this subsidy?  For starters, you need to demonstrate meaningful use "through means specified by the Secretary which may include an attestation, the submission of claims with appropriate coding, a survey response, or other means specified by the Secretary."  You must also use electronic prescribing in connection with your patient care.

The rules also require that your EHR is "connected in a manner that provides, in accordance with law and standards applicable to the exchange of information, for the electronic exchange of health information to improve the quality of health care, such as promoting care coordination."

The final requirement is that you meet the standard for reporting on measures using EHR, and "submit information for such period, in a form and manner specified by the Secretary, on such clinical quality measures and such other measures as selected by the Secretary."

Assuming you comply with these provisions, expect to receive your subsidy payments directly from the federal government in a manner similar to how you receive your Medicare payments. And the $44k that you get from the federal government might very well cover the bulk of the costs associated with the purchase, installation, and implementation of an EHR system for your practice.




Income Taxes

Saving and Investing



  • 2nd quarter estimates due 6/15/09
  • Income tax returns for Ex-Patriots due 6/15/09


  • Determine if you are on track to meet the savings and debt reduction goals you set back in January
  • See if you have adequate Disability Insurance in place.


2008 & 2009 TAX FACTS

  • For 2008, the standard deduction for a single individual is $5,450 and for a married couple is $10,900. A person will benefit by itemizing once allowable deductions exceed the applicable standard deduction. Itemized deductions include state and local income taxes (or sales taxes), real estate taxes, mortgage interest, charitable contributions, and unreimbursed employee business expenses.
  • For 2008, the personal exemption is $3,500. Individuals will claim a personal deduction for themselves, their spouse, and their dependents. 
  • The maximum earnings subject to social security taxes is $106,800 for 2009, up from $102,000 for 2008.
  • The standard mileage rate is $.55 per business mile as of January 1, 2009, down from $.585 per mile as of December 31, 2008.
  • The maximum annual contribution into a 401(k) plan or a 403(b) plan is $16,500 in 2009.  And if you'll be 50 or older by December 31st, you can contribute an extra $5,500 into your 401(k) or 403(b) account this year.
  • The maximum annual contribution to your IRA is $5,000 for 2008 and 2009.  And if you turn 50 by December 31st, you can contribute an extra $1,000 that year.  You have until April 15, 2009 to make your 2008 IRA contributions. 


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This Month's Topics

Light Turns Green on Tax Credit of Energy Efficient Home Improvements

IRS Issues Seven Facts About The New Sales Tax Deduction For Vehicle Purchases

$44k For Compliance With New EHR Mandate

The FICA Refund for Medical Residents 

2008 & 2009 Tax Facts

Tax and Financial Planning Calendar for June 2009


Browse our index of previous months' newsletter topics

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For more information, go to our January 2009 Newsletter or our February 2001 Newsletter or read through the IRS' Chief Counsel Advice Memorandum on this issue.

Let's work together to keep current on this hugely valuable tax break.  Please post whatever you read or hear regarding this FICA issue on our new Message Board we set up just for this topic.

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