New Stuff for 2009 Tax Preparation

When you sit down to file your 2009 returns, you will find plenty new —changes passed by Congress last year to try to bring the country out of recession.

The personal exemption, for example, has increased, to $3,650 each for the taxpayer and dependents.

You might find yourself in a higher tax bracket.  Tax brackets have been adjusted upward by about 5% from 2008

Others revisions are more likely to affect low- and moderate-income workers. Income limits for the earned income tax credit have been raised and there's a new category — families with three or more children. The Internal Revenue Service says only one in six taxpayers claim the credit.

Still other changes affect those at higher income levels. The exemption for the alternative minimum tax (AMT) has been increased once again, this time to $70,950 for joint returns and $46,700 for individuals. If your income is higher than these amounts, you could be subject to the AMT tax.

But there are a host of other revisions, new for 2009, that will make filing your tax return this year a little more complicated.
For example, the standard deduction for non-itemized taxpayers has been revised.  The standard deduction has increased, to $11,400 for married couples filing jointly, $5,700 for individuals and $8,350 for heads of household.

New for this year, you can add to your standard deduction taxes you paid to the state or local real estate taxes; taxes you paid on a new car purchase or were a victim of a federally declared disaster, like hurricane Ike.  These additional deductions of course are available to the itemized taxpayers as well.

If you claim these new items as part of your standard deduction, be prepared to file a new form (Schedule L). Another new item is year is the tax credits for home purchases and education. And a tax credit for making your home more energy efficient has been reinstated.

In 2008, the credit was actually an interest-free, long-term loan. For people who purchased a home in 2009, the credit is a true credit — it only has to be paid back if you stop using the home as your principal residence within three years of purchase. The credit is $8,000 for first-time homebuyers, defined as those who haven't owned a home in the last three years.

Congress also added a credit for long-time homeowners who purchase a new principal residence — $6,500. To qualify, a homebuyer would have had to live at least five years in a previously owned home.

There are income limitations for both.

There also is an expanded credit for college education.

The new American opportunity credit provides a maximum annual credit of $2,500 per student for each of the first four years of college. The Hope credit that the new credit replaces temporarily covered only the first two years and for most people was smaller. To be eligible, taxpayers would have to pay $4,000 or more in tuition, fees and course materials.

The credit, which phases out at higher incomes, is 40 percent refundable. "This means that even people who owe no tax can get an annual payment of the credit up to $1,000 for each eligible student," the IRS said.

Other changes include the reinstatement of the credit for making your home more energy efficient. The maximum credit has increased, to $1,500 for $5,000 in expenditures on things like insulation, storm windows or an energy efficient furnace.

For people who lost jobs, the first $2,400 in unemployment benefits is not taxable.

To benefit from most of the tax breaks, you would have had to take action before the end of 2009. But there are a couple of exceptions.
You still might be able to claim the homebuyer credit if you have a signed contract by April 30.

And, if at the end of the day you find you owe the IRS money or want a bigger refund, you may be able to contribute to an individual retirement account until April 15 and take a deduction on your 2009 taxes.

If you're covered by a plan at work, you may be able to deduct a contribution of $5,000 — $6,000 if you're at least 50 — if your modified adjusted gross income is less than $65,000 if you're filing as an individual, or $109,000 if you're married filing jointly.