2009/2010 Tax Changes
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Listed below are tax changes that may affect you for this 2009/2010 tax season. More information is available on the IRS website (Download pdf version here). Click each heading to expand the description.

Alternative Minimum Tax (AMT)

    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

Small Business Tax Changes

    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.

New Motor Vehicles Tax Changes

    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.

Earned Income Credit

    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

Economic Recovery Payment

    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 -

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.

Tax Changes for Businesses

IRAs and Other Retirement Plans

Other Changes


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