There are several changes affecting Alternative Minimum Tax for 2009. Click for more info.
Highlights –
- AMT exemption amount increased. The AMT exemption amount has increased to $46,700 ($70,950 if married filing jointly or qualifying widow(er); $35,475 if married filing separately).
- AMT exemption amount for a child increased. The AMT exemption amount for a child whose unearned income is taxed at the parent's tax rate has increased to $6,700.
- Qualified motor vehicle tax allowed against AMT. If you claim a regular tax deduction for any state or local sales or excise tax on the purchase of a new motor vehicle, that tax is also allowed as a deduction for the AMT.
- Tax-exempt interest on specified private activity bonds issued in 2009 or 2010 exempt from AMT. Tax-exempt interest on specified private activity bonds issued in 2009 or 2010 is not an item of tax preference and therefore is not subject to the AMT. A refunding bond is treated as issued on the date of the issuance of the refunded bond (or, in the case of a series of refundings, the original bond). However, tax-exempt interest on a specified private activity bond issued in 2009 or 2010 to currently refund a private activity bond issued after 2003 and before 2009 is not an item of tax preference.
- Alternative tax net operating loss deduction (ATNOLD). The 90% limit on the ATNOLD does not apply to the portion of an ATNOLD attributable to any 2008 or 2009 loss you elected to carry back more than 2 years under section 172(b)(1)(H) of the Internal Revenue Code.
Child-Related Tax Changes
Information on adoption benefits, child's investment income, the definition of a qualifying child, and additional child tax credit. Click for more info.
Highlights -
- Adoption Benefits Increased. For 2009, the maximum adoption credit has increased to $12,150. The maximum exclusion from income for benefits under your employer's adoption assistance program has increased to $12,150.
- Child's Investment Income. The amount of taxable investment income a child can have without it being subject to tax at the parent's rate has increased to $1,900 for 2009.
- Earned Income for Additional Child Tax Credit. For 2009, the amount your earned income must exceed to claim the additional child tax credit is reduced to $3,000
Decreased Estimated Tax Payments for Qualified Individuals With Small Businesses
For 2009, qualified individuals with small businesses may be eligible to make smaller estimated tax payments. If you qualify, your required annual payment for 2009 is the smaller of 90% of the tax shown on your 2008 tax return or 90% of the tax shown on your 2009 tax return. Click for more info.
You are a qualified individual if -
- More than 50% of your gross income was from a business that had an average of fewer than 500 employees in 2008, and
- Your adjusted gross income in 2008 was less than $500,000 ($250,000 if you are filing married filing separately for 2009).
- Deduction for Credit or Debit Card Convenience Fees. If you pay your income tax (including estimated tax payments) by credit or debit card, you may be able to deduct convenience fees.
Deduction for Sales and Excise Taxes Imposed on Purchase of New Motor Vehicles
In 2009, you can deduct the state or local sales and excise taxes imposed on the purchase of a qualified motor vehicle after February 16, 2009, and before January 1, 2010. Click for more info.
Highlights –
- The amount of tax you are able to deduct is limited to the tax that is imposed on the first $49,500 of the purchase price of the vehicle.
- The deduction is phased out over a $10,000 range that begins when modified adjusted gross income is more than $125,000 ($250,000 if married filing a joint return).
- No deduction is allowed when modified adjusted gross income is equal to or more than $135,000 ($260,000 if married filing a joint return).
- The new deduction can be used to increase the amount of your standard deduction or you can take it as an itemized deduction.
The earned income credit amounts have increased for 2009 and 2010. Click for more info.
Highlights –
- Amount of credit increased. The maximum amount of the credit has increased. The most you can get for 2009 is:
- $3,043 if you have one qualifying child,
- $5,028 if you have two qualifying children,
- $5,657 if you have three or more qualifying children, or
- $457 if you do not have a qualifying child.
- Earned income amount increased. The maximum amount of income you can earn and still get the credit has increased for 2009. You may be able to take the credit if:
- You have three or more qualifying children and you earn less than $43,279 ($48,279 if married filing jointly)
- You have two qualifying children and you earn less than $40,295 ($45,295 if married filing jointly),
- You have one qualifying child and you earn less than $35,463 ($40,463 if married filing jointly), or
- You do not have a qualifying child and you earn less than $13,440 ($18,440 if married filing jointly).
- The maximum amount of adjusted gross income (AGI) you can have and still get the credit has increased. You may be able to take the credit if your AGI is less than the amount in the above list that applies to you.
- Investment income amount increased. The maximum amount of investment income you can have and still get the credit has increased to $3,100 for 2009.
- Advance payment of the credit. If you get advance payments of the credit from your employer with your pay, the total advance payments you get during 2009 can be as much as $1,826
Any economic recovery payment you receive during 2009 is not taxable. Click for more info.
These $250 payments are being made to most people who -
- Receive social security benefits, supplemental security income (SSI), railroad retirement benefits, or veterans disability compensation or pension benefits, and
- Live in a U.S. state, the District of Columbia, Puerto Rico, Guam, the U.S. Virgin Islands, American Samoa, or the Northern Mariana Islands.
If you are married and you and your spouse both meet these requirements, each of you may get a $250 payment.
If you are entitled to a payment, you will get it automatically. You do not need to apply for it.
Education-Related Tax Changes
Information on education savings bond exclusion, hope and lifetime learning credits, tuition and fees deduction, and student loan interest deduction. Click for more info.
Highlights -
- Education Savings Bond Exclusion
For 2009, the amount of your interest exclusion is phased out (gradually reduced) if your filing status is married filing jointly or qualifying widow(er) and your modified adjusted gross income (AGI) is between $104,900 and $134,900. - Hope and Lifetime Learning Credits
The modified adjusted gross income phaseout limits have increased for 2009. The American Opportunity Credit (an expansion of the Hope Credit) is available for 2009 and 2010.
Health/Medical-Related Tax Changes
Information on Archer Medical Savings Accounts (MSAs), Health Savings Accounts(HSAs), and long-term care premiums. Click for more info.
Highlights -
- Archer Medical Savings Accounts (MSAs)
For Archer MSA purposes for 2009, the minimum annual deductible of a high deductible health plan increases to $2,000 ($4,000 for family coverage). - Health Coverage Tax Credit
Information on credit increase, new enrollees, TAA recipients, and coverage under employee benefit plans. - Health Flexible Spending Arrangements (FSAs)
A special rule allows amounts in a health FSA to be distributed to reservists ordered or called to active duty. - Health Savings Accounts (HSAs)
The minimum/maximum annual deductible, out-of-pocket expenses,and maximum contribution amounts have increased for 2008 and 2009. - Long-Term Care Premiums
For 2008 and 2009, the maximum amount of qualified long-term care premiums includible as medical expenses has increased.
Home/Residence-Related Tax Changes
There are many tax-related benefits for buying a home in 2010. Click for more info.
Discharge of Qualified Principal Residence Indebtedness
The Emergency Economic Stabilization Act of 2008 extended the exclusion from gross income for the discharge of qualified principal residence indebtedness by an additional 3 years. The exclusion now applies to debt discharged after 2006 and before 2013.
First-Time Homebuyer Credit
If you are a first-time homebuyer you may be able to claim a one-time tax credit.
Highlights –
- Deadline extended for qualifying home purchases from Nov. 30, 2009, to April 30, 2010. Additionally, if a buyer enters into a binding contract by April 30, 2010, the buyer has until June 30, 2010, to settle on the purchase.
- Maximum credit amount $8,000 for a first-time homebuyer, and “long-time resident” credit of up to $6,500.
- For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax returns.
IRS YouTube Videos:
New Homebuyer Credit
Consejos Tributarios de Fin de Año
Sale of Main Home
Gain from the sale or exchange of the main home is no longer excludable from income if allocable to periods of nonqualified use.
Other Changes
Standard deductions, personal exemption phaseouts, and itemized deduction phaseout income limits have been updated. Click here for the full list of changes.
Highlights –
- Standard Deduction Increased – The standard deduction for people who do not itemize their deductions on Schedule A (Form 1040) is, in most cases, higher for 2009 than it was for 2008.
- Income Averaging for Farmers and Fisherman – New rules apply. Information on settlements from Exxon Valdez litigation.
- Increase in Limit on Long-Term Care and Accelerated Death Benefits Exclusion
- Increase in Personal Casualty and Theft Loss Limit – General rule for personal casualty or theft loss for 2009.
- Itemized Deductions – The itemized deduction phaseout income limits have increased for 2009.
- New Rules for Children of Divorced or Separated Parents – For tax years beginning after July 2, 2008 (the 2009 calendar year for most taxpayers), new rules apply to allow the custodial parent to revoke a release of claim to exemption that was previously released to the noncustodial parent on Form 8332 or similar form.
- Penalty for Failure to File Income Tax Return Increased – The failure to file penalty has increased.
- Personal Exemptions – The deduction amount and phaseout income levels have increased for 2009.
For 2009, the phaseout begins at:
- $125,100 for married persons filing separately,
- $166,800 for single individuals,
- $208,500 for heads of households, and
- $250,200 for married persons filing jointly or qualifying widow(er)s.
- For 2009, each exemption cannot be reduced to less than $2,433.
- Qualified Transportation Fringe Benefits – Changes to the monthly exclusion for commuter highway vehicle transportation and transit passes and reimbursement for reasonable expenses of qualified bicycle commuting.
- Residential Energy Credits – Information on residential energy credits.
- Social Security and Medicare Taxes – The maximum amount of wages subject to the social security tax for 2009 is $106,800.
- Special Limitation Period for Retroactively Excluding Military Retirement Pay
- Standard Mileage Rate
The standard mileage rate for business use of your vehicle, medical and move- related use and charitable use have decreased for 2009. Click here for our mileage table.
- Unemployment Compensation
For any tax year beginning in 2009, each recipient of unemployment compensation can exclude from gross income up to $2,400 of the amount he or she received during the year. - Wage Threshold for Household Employees
The social security and Medicare wage threshold for household employees is $1,700 for 2009.
Tax regulations and numbers for businesses have been updated for 2009. Click for the full list.
Highlights -
- 5-Year Carryback of 2008 and 2009 Net Operating Losses (NOLs) for Eligible Small Businesses (ESBs)
For 2009, you can choose a 3, 4, or 5-year carryback period for the part of your 2009 NOL that is an ESB loss.
- Alcohol and Cellulosic Biofuel Fuels Credit
There are several changes to alcohol and cellulosic biofuel fuels credits.
- Biodiesel and Renewable Diesel Fuels Credit
There are several changes to the biodiesel and renewable diesel fuels credit.
- Build America Bonds
Find out what a build America bond is and how to claim a credit.
- Cancellation of Debt
Certain businesses can make an irrevocable election to delay recognition income from the cancellation of business debt arising from the reacquisition of certain types of business debt repurchased in 2009 or 2010.
- Carbon Dioxide Sequestration Credit
There are several changes to the carbon dioxide sequestration credit.
- Changes to Investment Credit
There are several changes to the investment credit.
- COBRA Premium Assistance Credit
The American Recovery and Reinvestment Act of 2009 (ARRA) allows a credit against employment taxes for providing COBRA premium assistance to assistance eligible individuals.
- Credit for Employer Differential Wage Payments
Eligible small business employers may be able to claim a credit for differential wage payments.
- Depletion
There is a change to the taxable income limitation on percentage depletion for 2009.
- Depreciation and Section 179 Expense
The depreciation limit on certain business vehicles has been reduced.
- Disqualified Corporate Interest Expense Disallowed Under Section 163(j) and Related Information
For tax years beginning after 2007, corporations will use Form 8926, Disqualified Corporate Interest Expense Disallowed Under Section 163(j) and Related Information, to figure the amount of any corporate interest expense deduction disallowed by section 163(j).
- Domestic Production Activities Deduction
For tax years beginning in 2007, 2008, or 2009, the percentage used to figure the domestic production activities deduction increases to 6%.
- Election to Accelerate Certain Credits in Lieu of the Special Depreciation Allowance
Corporations and a certain automotive partnership can elect to accelerate certain credits.
- Employer-Owned Life Insurance Contracts
Policyholders owning one or more employer-owned life insurance contracts may have to file a report.
- Health Savings Accounts (HSAs)
Information on changes for Health Savings Accounts (HSAs).
- Maximum Automobile Value for Using the Cents-Per-Mile Valuation Rule
An employer providing a passenger automobile for personal use by an employee may use special rules for determining the value of the personal use.
- Meal Expenses When Subject to "Hours of Service" Limits
Special rules for deducting business-related meal expenses.
- New Forms to Adjust Employment Tax Returns
There are several new forms for adjusting employment tax returns.
- Nonqualified Deferred Compensation Plans
There are new regulations on reporting requirements for amounts deferred under a nonqualified deferred compensation plan.
- Original Issue Discount (OID)Tables
Contains latest version of OID tables. Prior year tables are also available.
- Partial Exclusion Increased for Gain From Certain Small Business Stock
Exclusion of gain from the sale of qualifying small business stock is increased.
- Penalty for Late Filing of a Partnership Return
The late filing penalty has changed for certain late filed partnership returns.
- Penalty for Late Filing of an S Corporation Return
The late filing penalty has increased for certain late filed S-corporation returns.
- Qualified Transportation Fringe Benefits
Monthly exclusion amounts have increased.
- S Corporation Built-in Gains Tax
There is no tax imposed on the net recognized built-in gain for a certain period.
- Self-Employment Tax
The maximum amount of net earnings subject to the social security part of the self-employment tax has increased.
- Social Security and Medicare Taxes
The maximum amount of wages subject to the social security tax and Medicare tax has increased.
- Standard Mileage Rate
The standard mileage rate for business use of your vehicle, medical and move- related use and charitable use has decreased for 2009.
- Vehicle Credits
Information on new alternative motor vehicle credits.
- Work Opportunity Credit
A targeted group employee now includes certain unemployed veterans and disconnected youth.
IRAs and Other Retirement Plans
- 403(b) Plans
The limit on elective deferrals and annual additions have increased. - Modified AGI Limit for Retirement Savings Contributions Credit
You may be able to claim the retirement savings contributions credit. - Modified AGI Limit for Roth IRA Contributions
Your Roth IRA contribution limit is reduced (phased out) in some situations. - Modified AGI Limit for Traditional IRA Contributions
- Nonqualified Deferred Compensation Plans
There are new regulations on reporting requirements for amounts deferred under a nonqualified deferred compensation plan. - Qualified Plans
Limits on contributions and benefits, compensation limits, and elective deferrals (401(k) plans). - Roth Contribution Limit
Your contribution limit for 2009. - SIMPLE Plan
Increase in Limit on Salary Reduction Contributions Under a SIMPLE Plan - Temporary Waiver of Required Minimum Distributions (RMDs) for 2009
For 2009, you are not required to take an RMD from your IRA or most defined contribution retirement plans. - Traditional IRA Contribution and Deduction Limit
The contribution limit to your traditional IRA for 2009 - Tax Law Changes for Gifts and Estates and Trusts
- 2008 and 2009 Federal Income Tax Rates for Estates and Trusts
Details of the federal estate and trust tax rates. - Annual Exclusion for Gifts
2009 and 2010 changes to annual exclusion amounts for gifts. - Increased Estate Tax Applicable Exclusion Amount
Estate tax applicable exclusion amounts have increased. - Reduction of Maximum Estate and Gift Tax Rate
Maximum tax rate change for estate and gift tax. - Valuation of Qualified Real Property in Decedent's Gross Estate
Certain rules apply for the special use valuation method.