What's New for 2009

This article contains information that effects your 2009 tax return.

Tax Break for New Car Purchases in 2009
Taxpayers who buy a new passenger vehicle in 2009 (after Feb. 16, 2009, and before Jan. 1, 2010) may be entitled to deduct state and local sales and excise taxes paid on the purchase on their 2009 tax returns. Thus the taxpayers can buy now get cash back later on their tax returns. The deduction is limited to the state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle. The special deduction is available regardless of whether a taxpayer itemizes deductions on their return.

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.

Taxpayers can estimate their deduction with the help of IRS Publication 919, How Do I Adjust My Withholding? For purchases above $49,500 limit and in case of phase-outs, the lines 10a to 10k on Worksheet 10 take this into account.

First $2,400 of Unemployment Benefits Tax Free for 2009
The American Recovery and Reinvestment Act, which includes making every person who receives unemployment benefits during 2009 is eligible to exclude the first $2,400 of these benefits on their 2009 tax return. For a married couple, the exclusion applies to each spouse, separately. Thus, if both spouses receive unemployment benefits during 2009, each may exclude from income the first $2,400 of benefits they receive.

Unemployed workers can choose to have income tax withheld from their unemployment benefit payments at a flat 10 percent. Unemployed workers who expect to receive more than $2,400 in benefits this year should consider having tax withheld from their benefit payments in excess of that amount.

First-Time Homebuyers Tax Credit
Under the American Recovery and Reinvestment Act of 2009, qualifying taxpayers who purchase a home in 2009 before Dec. 1, 2009 receive up to $8,000, or $4,000 for married individuals filing separately. People can claim the credit either on their 2008 tax returns or on their 2009 tax returns. Read More...

Standard Deduction and Personal Exemption
Standard Deduction
Single ... $5,700 (add $1,400 for Blind/Elderly)
Married Filing Jointly ... $11,400 (add $1,100 for Blind/Elderly)
Head of Household ... $8,350 (add $1,400 for Blind/Elderly)
Married Filing Separately ... $5,700 (add $1,100 for Blind/Elderly)
Dependent ... Greater of $950 or sum of $300 and individual's earned income
Personal Exemption
$3,650

Temporary increase in the earned income tax credit (EITC) for taxpayers with three or more qualifying children
The American Recovery and Reinvestment Act (ARRA) provides a temporary increase in the earned income tax credit (EITC) for taxpayers with three or more qualifying children. The maximum EITC for this new category is $5,657. These changes apply to 2009 and 2010 tax returns.

The EITC credit begins to phase out at $21,420 for married taxpayers filing a joint return with children and completely phases out at $40,463 for one child, $45,295 for two children and $48,279 for three or more children. For married taxpayers filing a joint return with no children, the credit begins to phase out at $12,470 and completely phases out at $18,440.

Additional Child Tax Credit
Under ARRA more families will be eligible for the additional child tax credit, which is a refundable credit.

ARRA reduces the minimum earned income amount used to calculate the additional child tax credit to $3,000. Before ARRA, the minimum earned income amount was set to rise to $12,550. This change applies to tax years beginning in 2009 and 2010.

American Opportunity Credit for college education expenses
Under ARRA, the American Opportunity Credit modifies the existing Hope Credit for tax years 2009 and 2010, making the Hope Credit available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. The credit can be claimed for four post-secondary education years instead of two, and it also adds required course materials to the list of qualifying expenses. The maximum annual credit is $2,500 per student.

The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. The credit is phased out for taxpayers with incomes above these levels. These income limits are higher than under the existing Hope and Lifetime Learning Credits.

More Articles
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. 2009 Filing Requirements
2. 2008 Filing Requirements
3. Filing Requirement for a Dependent
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Partnerships
4. Filing W4 Employee’s Withholding Allowance Certificate
5. Missing W2, 1099-Misc, 1099-R, 1099-Int
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustment
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
3. First-Time Homebuyer Credit
State Tax Return
1. Working in Two or More States
Income Tax
1. My Tax Refund?

Complete List of Articles

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