Economic Recovery Payment
Any economic recovery payment you receive during 2009 is not taxable.
These $250 payments are being made to most people who:
Receive social security benefits
Supplemental security income (SSI)
Railroad retirement benefits
Veterans disability compensation
Pension benefits
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.
Making Work Pay and Government Retiree Credits
Two new credits you may be able to take for 2009 are the: Making work pay credit, and Government retiree credit.
Making work pay credit.
You may be able to take this credit if you have earned income from work. Even if your federal income tax withholding is reduced during 2009 because of the credit, you must claim the credit on your return to benefit from it.
You cannot take the credit if: Your modified AGI is $95,000 ($190,000 if married filing jointly) or more, You are a nonresident alien, or You can be claimed as a dependent on someone else’s return. The credit is 6.2% of your earned income but cannot be more than $400 ($800 if married filing jointly).
The credit will be reduced if:
You receive a $250 economic recovery payment (described earlier) during 2009, Your modified AGI is more than $75,000 ($150,000 if married filing jointly), or You take the government retiree credit discussed next.
Government retiree credit.
You can take this credit if you receive a pension or annuity payment in 2009 for service performed for the U.S. Government or any U.S. state or local government (or any instrumentality of one or more of these) and the service was not covered by social security. The credit is $250 ($500 if married filing jointly and both you and your spouse receive a qualifying pension or annuity). However, you cannot take the credit if you receive a $250 economic recovery payment during 2009. If you file a joint return, both you and your spouse receive a qualifying pension or annuity, and both of you receive an economic recovery payment, no government retiree credit is allowed; if only one of you receives an economic recovery payment, the credit is $250. Social security number. To take either credit, you must include your social security number (if filing a joint return, the number of either you or your spouse) on your return. A social security number does not include an identification number issued by the IRS. Schedule M. Generally, you will use new Schedule M (Form 1040A or 1040) to figure both the making work pay credit and the government retiree credit. Both credits are refundable, which means they are treated like payments you made and may give you a refund even if you had no tax withheld from your pay or your pension. If you are filing Form 1040EZ, you can take the making work pay credit on that form and do not have to file Schedule M.
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. A qualified motor vehicle includes a passenger automobile, light truck, or motorcycle, the original use of which begins with that purchaser and that has a gross vehicle weight rating of 8,500 pounds or less. A qualified motor vehicle also includes a motor home, the original use of which begins with that purchaser. 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 (if you are not electing to take the state and local general sales tax deduction).
Alternative Minimum Tax (AMT)
The following changes to the AMT went into effect for 2009.
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.
2009 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.
For 2010, the amount your earned income must exceed to claim the additional child tax credit is $3,000.
Adoption Benefits Increased
For 2009, the maximum adoption credit has increased to $12,150. Also, the maximum exclusion from income for benefits under your employer’s adoption assistance program has increased to $12,150. These amounts are phased out if your modified AGI is between $182,180 and $222,180. You cannot claim the credit or exclusion if your modified AGI is $222,180 or more.
Residential Energy Credits
Nonbusiness energy property credit. This credit, which expired after 2007, has been reinstated. You may be able to claim a nonbusiness energy property credit of 30% of the cost of certain energy-efficient property or improvements you placed in service in 2009. This property can include high-efficiency heat pumps, air conditioners, and water heaters. It also may include energy-efficient windows, doors, insulation materials, and certain roofs. The credit has been expanded to include certain asphalt roofs and stoves that burn biomass fuel.
Limitation.
The total amount of credit you can claim in 2009 and 2010 is limited to $1,500.
Residential energy efficient property credit. Beginning in 2009, there is no limitation on the credit amount for qualified solar electric property costs, qualified solar water heating property costs, qualified small wind energy property costs, and qualified geothermal heat pump property costs. The limitation on the credit amount for qualified fuel cell property costs remains the same.
Standard Mileage Rate
For 2009, the standard mileage rate for the cost of operating your car for business use is 55 cents per mile.
Medical- and move-related mileage
For 2009, the standard mileage rate for the cost of operating your car for medical reasons or as part of a deductible move is 24 cents per mile.
Charitable-related mileage
For 2009, the standard mileage rate for the cost of operating your car for charitable purpose remains 14 cents per mile.
Standard Deduction Increased
2009 Changes
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. In addition to the annual increase due to inflation adjustments and the increase allowed for the deduction for certain real estate taxes and a net disaster loss, your 2009 standard deduction is increased by any state or local sales tax imposed on the purchase of a qualified motor vehicle after February 16, 2009, and before January 1, 2010.
Itemized Deductions
If your AGI is above a certain amount, you may lose part of your itemized deductions. In 2009, this amount is increased to $166,800 ($83,400 if married filing separately). See the instructions for Schedule A (Form 1040), line 29, for more information on figuring the amount you can deduct.
Personal Exemptions 2009 Changes
The amount you can deduct for each exemption has increased to $3,650 for 2009. You lose part of the benefit of your exemptions if your AGI is above a certain amount. The amount at which the phaseout begins depends on your filing status. 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.
Health Savings Accounts (HSAs)
2010
High Deductible Health Plan (HDHP). For HSA purposes, the minimum annual deductible of an HDHP increases to $1,200 ($2,400 for family coverage) and the maximum annual deductible and other out-of-pocket expenses limit increases to $5,950 ($11,900 for family coverage).
Limits on contributions. The maximum HSA contribution increases to $3,050 ($6,150 for family coverage).
2009
High Deductible Health Plan (HDHP). For HSA purposes, the minimum annual deductible of an HDHP increases to $1,150 ($2,300 for family coverage) and the maximum annual deductible and other out-of-pocket expenses limit increases to $5,800 ($11,600 for family coverage).
Limits on contributions. The maximum HSA contribution increases to $3,000 ($5,950 for family coverage). The maximum additional contribution for individuals age 55 or older increases to $1,000.
Earned Income Credit
2009 Changes
The following paragraphs explain the changes to the credit for 2009.
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 also 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.
2010 Changes
Amount of credit increased. The maximum amount of the credit has increased. The most you can get for 2010 is:
$3,050 if you have one qualifying child,
$5,036 if you have two qualifying children,
$5,666 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 2010. You may be able to take the credit if:
You have three or more qualifying children and you earn less than $43,352 ($48,362 if married filing jointly), You have two qualifying children and you earn less than $40,363 ($45,373 is married filing jointly), You have one qualifying child and you earn less then $35,535 ($40,545 if married filing jointly), or You do not have a qualifying child and you earn less then $13,460 ($18,470 if married filing jointly). Investment income amount. The maximum amount of investment income you can have and still get the credit is still $3,100 for 2010.
Advance payment of the credit. If you get the advance payments of the credit from your employer with your pay, the total advance payments you get during 2010 can be as much as $1,830.
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