What's New For Tax Year 2009 (When Filing In 2010)

To assist you with assembling your 2009 tax material, the following are meaningful tax changes affecting individuals and businesses, effective for tax year 2009.

INDIVIDUALS

First-time homebuyer credit: Credit increases to as much as $8,000 for homes purchased after 2008 and before May 1, 2010 (July 1, 2010, if contract signed prior to May 1, 2010). Credit phases out at adjusted gross income (AGI) between $75,000 and $95,000 for single taxpayers and for joint taxpayers with AGI between $150,000 and $170,000. Non-first-time homebuyers: Credit is 10 percent of purchase price up to $800,000 with a maximum credit of $6,500 for those taxpayers ages 18 and over. Credit phases out for single taxpayers with AGI between $125,000 and $145,000 and for joint taxpayers with AGI between $225,000 and $245,000. Refundable child credit: Credit equal to the greater of 15 percent of earned income in excess of $3,000 or, for taxpayers with three or more qualifying children, the excess of Social Security taxes for the tax year over the earned income credit for the tax year. COBRA subsidy: The 65-percent subsidy for continuation coverage is not taxable. Section 529 plan expenses: Computer equipment, Internet access and related services now qualify as qualified education expenses. Health-coverage tax credit: Increased credit to 80 percent of premiums for qualified health insurance of taxpayer and dependents. Unemployment compensation: Tax-free up to $2,400 per person. American Opportunity Education Credit: The maximum Hope education credit is increased to $2,500 from $1,800. Education credit income limits have also increased, with phaseouts occurring for single taxpayers with AGI between $80,000 and $90,000 and joint taxpayers with AGI between $160,000 and $180,000. Deduction for motor vehicle taxes: Deduction may be available for state and local taxes paid on purchases of new vehicles after February 16, 2009. Phased out for single taxpayers with AGI between $125,000 and $135,000 and for joint taxpayers with AGI between $250,000 and $260,000. Tax on child's investment income: Amount of child's income not subject to tax at parents' rate is increased to $1,900 from $1,800. "Cash for Clunkers": Payments made under the program are not taxable for federal income-tax purposes. Making Work Pay credit: Refundable credit in the amount of 6.2 percent of earned income. Credit is phased out for single taxpayers with AGI of $75,000 to $95,000 and for joint taxpayers with AGI...