2010 Business Income Tax Depreciation / Research Credit

As of today, the following business tax breaks expired at the end of 2009 and are no longer available in 2010: 50% bonus depreciation on new business equipment / fixed assets, including the extra $8,000 automobile first-year depreciation deduction; research credit. Also, IRC Section 179 “depreciation” / “expense election” of $250,000 drops to $134,000 (California tax amount is still $25,000) and the phase-out starts at $540,000 rather than $800,000 (California tax amount remains at $200,000).

Military Spouses Residency Relief Act

Under the new Military Spouses Residency Relief Act, signed into law on November 11, 2009, spouses of military service members who relocate from one state to another on military orders do not become residents of the new state for income tax purposes. This means that the military spouse’s wage/salary and self-employment income is not taxable by the new state. This new law will result in big California tax savings for some military families. This makes the income tax treatment of the military spouse similar to that of the service member, who does not acquire residency in the new state because of the Servicemembers Civil Relief Act. This new law is effective January 1, 2009.

Previously, a military spouse would acquire California tax residency when moving to California under the service member’s Permanent Change of Station (PCS) orders. The military service member would not, so the spouses had different state tax residency and the spouse’s wage/salary and self-employment income was taxed by California.

California Releases Tax Refunds

California State Controller announced he has begun releasing more than $2.8 billion in payments that he was forced to delay in February, due to the state's cash shortage. Both personal and corporate tax refunds have now resumed.

California Homebuyer’s Credit

California taxpayers who purchase a new home (new construction) March 1, 2009 through February 28, 2010 and use it as their primary residence for the following two years can get a tax credit of 5% of the purchase price (maximum $10,000). 1/3 of the credit is claimed in the year of purchase and each of the two succeeding years. To apply for the credit, the escrow person, on behalf of the seller and buyer, must fax the completed Form 3528-A, Application for New Home Credit, to the FTB , within seven calendar days after the close of escrow. Only the first $100 million of valid credit applications will be approved. (FTB—Tax Credit for New Home Purchase, 02/27/200).