What’s New for Your 2009 Federal Income Taxes
by Milton Gugenheim
The following are the new/changes for Tax Year 2009. Go down the list for ones specific to your tax situation. Obtained specifics from publications at the IRS. Call, toll free, 1-800-929-3676 or internet at www.irs.gov– a friendly and useful site. (Click on the upper left corner on “Form and Publications” to find and down load your publication).
- Makework credit - up to $400 ($800 for Married Filling Joint MFJ) on earned income. If the person is on Social Security or a government pension, the maximum is $150. Schedule M.
- Unemployed compensation - The first $2400 is not taxed.
- Education credit – Hope Credit is now called American Opportunity Education Credit. The coverage is now for four years and up to $2500 credit.
- Motor vehicle tax – For a car purchased after February 16, 2009. The tax is put on Schedule L for persons who do not use Schedule A
- Qualified child definition – See Publication 17 (Pub 17) chapters 3, 21, 34 and 36, or Form 1040 Instructions (Inst 1040) New requirements
- Earned income credit (EIC) – The change includes a third child in some cases. Details on maximum income levels, etc. See Pub 17, chapter 35 or Inst 1040.
- Divorced or Separated Parents – new rules for claiming a noncustodial child.
See Pub 17, Chapter 3
- Child invested income - not subjected to parent’s tax rate with invested income under $1900.
- Personal casualty or theft loss – limit is over $500. This is addition to 10% of Adjusted Gross Income (AGI) limit that generally applies to the net loss.
- First home or replacement homebuyer credit –If home is bought after 2008 and no later the April 30, 2010. Credit is $8,000 max. Persons not qualified as “first time homebuyer” credit up to $6,500. Purchases made 2010 can claim credit on 2009 0r 2010 tax returns. There income limits. See Pub 17 chapter 17 for requirements.
- Standard mileage rate for 2009 is 55 cents per mile. Medical travel is 24 cents.
- Electric vehicle credit – See Pub 17, chapter 37 for details.
- Credit for nonbusiness energy saving item – Stoves, refrigerator, windows, heaters, AC, etc. You will receive a manufacturers’ certificate when the qualified item is purchased. See Pub 17, chapter 37
- Retirement saving accounts (IRA and Roth):
Traditional IRA – modified adjusted gross income (AGI) has raised it to a maximum of $65,000 (single) or $109,000 MFJ Roth IRA – limit has been raised to $120,000 ($176,000 MFJ) modified AGI
under certain conditions. See Pub 17, chapter 17 or Publication 590.
- Retired savings contribution credit – The limit has been raised to $27,000 single ($41,625 MFJ)
- Standard deduction is $3650 for each exemption (Income limit is $166,800 in addition, reduction is in effect).
- Maximum Social Security Tax for Self Employed – is now $106,800 (6.2%) Medicare is taxed on all income. (1.45%)
Note: Form 1040 Instructions contain much of this same information.
New for 2010 Income Tax
- EIC - income credit limits have been raised
- Personal casualty or theft loss - reduced to $100 vs. $500.
- IRA deduction increased for a person in a qualified retirement plan.
- Roth IRA income limits – raised to $120,000, single ($177,000 MFJ)
- Conversion to Roth IRA – no income limit required in 2010. Will be included in equal amounts in 2011 and 2012 income, or full amount in 2010 income.
- Mileage is 50 cents per mile. Others, no change.
- Expiring tax benefits:
- Deduction for education expense in figuring AGI.
- Tuition and fees deduction to AGI.
- State income tax or local sales tax.
- ax on a motor vehicle (Schedule L in 2009)
- Unemployment compensation exclusion of $2,400
Note: Subject to changes by Congress.
Milton Gugenheim is a HAL-PC member and has been an AARP Tax Aide Instructor and Local Coordinator for over eighteen years. He may be contacted at firstname.lastname@example.org.
Editor’s notice: This article does not constitute tax advice and is presented for informational use only. For more complex questions consult a tax accountant or lawyer. Note: Even the IRS will not guarantee its own advice.