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Updated, Jan. 5, 2012
Changes for 2009
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. (The exclusion from income of up to $2,400 is set to expire
in 2010. This benefit is not available in tax year 2010.
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).
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.
Changes for 2008
Mortgage Forgiveness Debt Relief Act
Taxpayers who had a foreclosure, deed-in-lieu of sale, mortgage loan modifciation or a short-sale may qualify for the Mortgage Forgiveness Debt
Relief Act which started in tax year 2007.
In tax law, the amount of forgiven debt is typically treated as income and is taxed. But to help people who are affected by the mortgage crisis,
Congress excluded homeowners whose mortgage debt was forgiven in years 2007, 2008 and 2009. Keep records of the foreclosure/sale, and statements of
the amount that the bank wrote off.
Higher Standard Deduction for certain taxpayers
Standard deduction increased by real estate taxes and net disaster losses. Your standard deduction is increased by:
- Certain state or local real estate taxes you paid, and
- A net disaster loss attributable to a federally declared disaster.
See the 1040 Instructions for line 39c on page 34.
Retirement Savings Credit
The income limit for the savers credit is $53,000 for joint filers (up $1,000), $39,750 for heads of household (up $750) and $26,500 for singles
and married persons filing separately (up$500). Low-and moderate income workers who contribute to a retirement plan, such as an IRA or 401(k),
may qualify for the credit, which is available in addition to any other tax savings that apply.
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Retirement Plans
Participants in most Employer-Sponsored 401(k) plans and 403(b) plans for employees of public schools and certain tax-exempt
organizations can contribute up to $15,500, unchanged from 2007. Individuals, age 50 or over, can make an additional contribution of up to $5,000,
also unchanged from 2007.
Individuals participating in SIMPLE retirement plans can contribute $10,500, unchanged from 2007. Those, age 50 or over, can make an
additional contribution of up to $2,500, also unchanged from 2007.
The annual contribution limit for most Defined Contribution Plans rises to $46,000, up from $45,000 in 2007.
Changes for 2007
Certain Taxpayers May Now File Their Employment Taxes Annually
File Just One, Consider It Done!
To reduce burden for certain small business taxpayers, the IRS has changed their employment tax filing requirement from
quarterly to annually. If you have been filing Forms 941 and believe your yearly employment taxes will be $1,000 or less
in this calendar year (average annual wages of $4,000 or less), and have not received notification of your eligibility
by mail by mid-February, please call us by April 1st on (800) 829-4933, and select option 2. If we hear from you by
April 1, we may be able to change your filing requirement to Form 944, Employer's Annual Federal Tax Return, rather than
Form 941, Employer’s Quarterly Federal Tax Return. If you contact us after April 1, you will remain a Form 941 filer for
this calendar year. If you are starting a new business you should contact as soon as possible to determine if you are
eligible.
Here are some frequently asked questions and answers about the Form 944 program:
When will I file Form 944?
This return will be due once a year, on January 31, after the end of the tax year.
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Changes to Lifetime Learning and Hope Credits
If your adjusted gross income is over $47,000 ( or $94,000 if your’re married filing jointly ) the amount phases out for these two tax credits. The maximum Hope Credit for 2007 is $1,650, an increased from $1,500 in 2006
Expired Tax Benefits
Qualified electric vehicle credit. You cannot claim this credit for any vehicle you placed in service after 2006.
Mortgage Insurance Premiums Treated as Home Mortgage Interest
Premiums that you pay or accrue for "qualified mortgage insurance" during 2007 in connection with home acquisition debt on your qualified home are deductible as home mortgage interest. The deduction is only if you took out a new mortgage or refinanced in 2007. The amount you can deduct is reduced by 10% (.10) for every $1,000 ($500 if your filing status is married filing separately) by which your adjusted gross income exceeds $100,000 ($50,000 if your filing status is married filing separately). It is phased out completely if your adjusted gross income is more than $109,000 ($54,500 if married filing separately).
Don't confuse this with homeowner's insurance to protect against fire or theft. Instead, this is insurance that protects a lender againist financial loss if a homeowner defaults on mortgage payments and the house has to be sold at foreclosure.
Schedule A (Form 1040) You can deduct mortgage insurance premiums you paid or accrued during 2007 on Line 13 of the 2007 Schedule A 1040.
Alternative Minimum Tax
AMT exemption amount decreased. The AMT exemption amount has decreased to $33,750 for single ( 45,000 for married filing joint
or qualifing widow(er); 22,500 for married filing separately).
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Rebate for 2008
Basic Eligibility Requirements - You have, or your family has, at least $3,000 in qualifying income from,
or in combination with, Social Security benefits, certain Veterans Affairs benefits, Railroad Retirement benefits and earned income. Supplemental
Security Income (SSI) does not count as qualifying income for the stimulus payment. If you qualify you need to file a 2007 Federal Tax Return
to receive your rebate.
Taxpayers whose adjusted gross income is under $75,000 ($150,000 married filing joint) will receive the full rebates. Rebates for those
earning over $75,000 ($150,000 couples) will be gradually phased out.
To find out the amount of your expected Rebate for 2008, use the Economic Stimulus Payment Calculator
on the IRS web site. If you did not receive the amount that you expected because of unreported income you can file an Amended Return, 1040X.
Please allow 8 to 12 weeks for your rebate to arrive.
Changes for 2006
1) Credit for federal telephone excise tax paid. For tax year 2006 Only.
If you paid the federal excise tax on your long distance or bundled telephone service, you may be able to request a credit. This is a one time refundable credit for tax year 2006. See line 71 on form 1040. (Thanks Bob)
2) Credit for residential energy improvements. Credit for amounts paid in 2006 to have qualified energy saving items installed in connection with your home. (See line 52 of form 1040)
3) Elective salary deferrals. The maximum amount you can defer under all retirement plans is generally limited to $15,000 ($10,000 if you only have SIMPLE plans; $18,000 for section 403(b) plans if you qualify for the 15 -year rule).
4) Alternative motor vehicles. You may be able to take a credit if you place an alternative motor vehicle (including a qualified hybrid vehicle) or alternative fuel vehicle refueling property in service in 2006. (See forms 8910 and 8911)
5) State and local general sales taxes. This itemized deduction was set to expire. This deduction was extended late in December for 2006, but the extension was made after the tax forms were printed. If you are claiming state and local general sales taxes instead of state and local income taxes you will have to write ST on this line to indicate you are claiming sales tax.
Changes for New York State taxpayers.
1) New Empire State child credit -(see Form IT-213). A new refundable credit is available to full-year New York State residents. The credit is equal to 33% of the federal child tax credits for each child who qualifies for the federal child tax credit and is at least four years old; or the sum of $100 for each child who qualifies for the federal child tax credit and is at least four years old, whichever amount is greater.
2) Noncustodial parent New York State earned income credit (EIC) - see Form IT-209. A new noncustodial parent New York State earned income credit may be available to a full-year resident individual who has attained the age of 18, is a parent of a minor child who do not reside with the individual, has an order requiring the individual to make child support payments that are payable through a support collection unit, and has paid an amount of child support due during the tax year for every order that requires the individual to make support payments.
3) New home heating system credit (see Form IT-240)- must be an Energy Star label.
4) Clean heating fuel credit (see Form IT-241) new credit for the purchase of bioheat that is used for space heating or hot water production for residential purposes. 5) Alternative fuels credit vehicle - (see form IT-253) Credit for investing in a Hybrid Vehicle.
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Changes for 2005
What you can count on for 2005.
1) You can contribute a maximum of $14,000 to your 401(K) or similiar retirement account, up $1,000 from 2004.
2) Donors of used cars can forget about deducting their full blue book value. They can deduct what the charity nets from the sale of the car.
3) You can deduct either your state sales tax or your states income tax on your Federal return, a boon to people living in states with low or no income tax. Those living in high tax states like California and New York may not benefit at all.
4) The Individual Retirement Account (IRA) contribution limit climbs to $4,000 for tax year 2005, up $1,000.
5) The Tuition and Fees Deduction is increased to a maximum of $4,000, up $1000 from when this deduction started in tax year 2002. You can not
take both the Education Credit and the Tuition/Fees Deduction for the same student. Do the worksheets to see which gives you
the largest amount.
Changes made in earlier years.
Changes before 2005.
- Starting in 2002 a new tax bracket of 10% was added and other brackets were reduced. All taxpayers will benefit from the reduced tax rates.
- Change in Schedule B designed to cut paperwork started in tax year 2002. Schedule B will only be required if you have more than $1,500
in interest and dividends. Under the old rule if you had more than $400 in interest and dividends you had to fill out this form. As a result of this
change about 15 million taxpayers will have one less form to file with their returns.
- New, Retirement Savings Contribution Credit. You may be able to take a credit of up to $1,000 for qualified retirement savings
contributions. However, you cannot take this credit if your adjusted gross income (AGI) is above a threshold amount. [This is a great credit,
don't miss out on this one]
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