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Auburn, NY 13021
ph: 3152553074
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2009 Tax Changes
2009 Federal Income Tax Brackets
The following graphic gives you the projected tax brackets for married couples filing jointly as well as single filers. As you can see, the numbers increased across the board. In other words, if these numbers hold up, your effective tax rate will drop a bit in 2009due to inflation.
How much can you expect to save? The numbers vary with the particulars of your situation, but a married couple with a taxable income of $100k can expect to pay $312.50 less in federal income taxes in 2009. Again, this ignores the possibility of any major changes to our tax laws.
- What will the 2009 standard deduction be?
According to the IRS, around two out of every three taxpayers claim the standard deduction. Once again, the rates that apply to 2009 have increased from their 2008 levels. The standard deductions that apply in 2009 include:
- Single - $5,700
- Married filing separately - $5,700
- Head of household - $8,350
- Married taxpayers filing jointly / qualifying widow(er)s - $11,400
- Married taxpayers filing separately - $5,700
- What will the Personal Exemption be for 2009?
The amount you can deduct for each exemption you can claim on your federal income taxes has increased again in 2009. The 2008 value of $3,500 has increased to $3,650 in 2009. That's a total increase of $250 over the last two years.
- What are the Mileage Deduction Rates for 2009?
- As was the case in 2008, the IRS is telling us once again that it's more expensive to drive a car in 2009. And that means the standard mileage deduction rates are increasing. The following table outlines the mileage deduction rates for the tax year 2009:
Mileage Deduction Rates 2009
Category Rate Business miles 55.0 cents per mile Charitable Services 14.0 cents per mile Medical Travel 24.0 cents per mile - Will Earned Income Credit increase in 2009?
The maximum earned income tax credit for low and middle-income workers and working families with two or more children is $5,028 in 2009, up from $4,824 in 2008. The qualifying income limit for the credit for joint return filers with two or more children is $43,415 in 2009, up from $41,646.
- How about the Lifeime Learning and Hope Credit for 2009?
In 2009, tax law changes also apply to the Hope Credit. The maximum Hope Credit, available for the first two years of post-secondary education, remained at $1,800. In 2009, the taxpayer's modified adjusted gross income will be used to determine the reduction in the amount of the Hope Scholarship and Lifetime Learning Credits. Credit reductions start for taxpayers with an AGI in excess of $50,000, or $100,000 for those filing joint returns.
- First Time Home Buyer Credit for 2009?
- A taxpayer who recently bought a home or is considering buying one may qualify for this credit if she did not own a main home during the last three years. The value of the credit is up to $ 7,500 on homes bought from April 9, 2008 to June 30, 2009. It can be claimed on form 5405 and is to be repaid each year as an additional income tax. There are certain limits of income and other conditions.
- I've heard that there is a new sales tax deduction?
People who actually buy a car last year can claim the sales taxes regardless if they actually itemize! The vehicle has to be purchased after February 16, 2009. This benefit is phased out after a couple’s income hits $250K, and applies only to the tax associated with the first $49,500 of the car price.
- I heard a Kiplinger Report on 2nd homes - what's up?
If you convert a second home into a principal residence after 2008, you may not be able to exclude all of your gain. A portion of the gain on a subsequent sale of the home will be ineligible for the home-sale exclusion of up to $500,000, even if the seller meets the two-year ownership-and-use tests. The portion of the profit that’s subject to tax is based on the ratio of the time after 2008 when the house was a second home or a rental unit, to the total time you owned it. So if you have owned a vacation home for 18 years and make it your main residence in 2011 for two years before selling it, only 10 percent of the gain (two years of nonqualified second home use divided by 20 years of total ownership) is taxed. The rest qualifies for the home-sale exclusion of up to $500,000.
- What's up with the AMT in 2009?
- The AMT exemption amount for individuals has increased to $46,700. If married filing joining or a qualifying widow or widower, the AMT exemption rises to $70,950. If married but filing separately, that amount rises to $35,475.
The AMT exemption amount for children has also increased. Kids whose unearned income is taxed at their parent's tax bracket will receive an AMT exemption of $6,700.
New in 2009, qualified motor vehicle tax is allowed against AMT. If you purchase a new motor vehicle and claim a regular deduction for any sales or excise taxes, whether they are state or local, that tax is also allowed as a deduction against the AMT.
For more information, download Form 6251.
Contributions to Retirement Accounts
There was some good news in 2009 for those individuals willing to increase the rate of savings into their retirement accounts. Contribution limits for 401k as well as 403b plans increased in 2009 from $15,500 to $16,500. Catch up contributions also increased by $500 to $5,500 in 2009. Contribution limits to SIMPLE retirement plans also increased by $1,000 to $11,500, while the catch up contributions remained unchanged at $2,500.
The income limits for those willing to contribute to traditional IRAs as well as Roth IRA plans increased again in 2009. The income phase-out threshold for Roth IRAs now starts at $166,000 for those filing joint returns, and $105,000 for taxpayers with a filing status of single or head of household.
Finally, if you're covered by a retirement plan at work and you are considering contributing to a tax-deductible traditional IRA, then the income phase-out limits start at $89,000 for joint filers, and increases to $55,000 for those with a filing status of single or head of household.
To download IRS Publication 553, please select below. Remember, all IRS publications are in Adobe Acrobat. You will need Acrobat installed to view and print these documents.
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163 North St
Auburn, NY 13021
ph: 3152553074
fax: 3152552895
jgl
