New Tax Credits and Deductions for 2009


Good news: There are many new deductions, credits and expanded eligibility rules for home and car buyers, college students and their parents, homeowners who installed energy-efficient improvements as well as the unemployed, for the 2009 tax return! IRS spokeswoman Nancy Mathis estimates the average tax refunds will increase about $ 2,800 above last year’s level, due to the combination of these new tax savings.

Here is an overview of new tax credits you can enjoy for 2009:

Education Credit

The current American Opportunity Credit modifies the old Hope Credit for tax years 2009 and 2010 by allowing a broader range of taxpayers to participate, including many with higher incomes and those who owe no tax. The maximum $2,500 credit per student is available to eligible taxpayers who spent at least $4,000 in qualified Filling tax formscollege tuition, fees and requisite course materials in 2009. The full credit is available to individuals, whose gross income does not exceed $80,000 or $160,000 for married couples filing a joint return.

For those who claim the credit and owe no tax, the refund may be 40% of the credit, up to $1,000 per student, while other education credits are not refundable.

The American Opportunity Credit can be applied to expenses paid during the first four years of college instead of only two as previously allowed. Although graduate students are not eligible for this new credit, they still qualify for the Lifetime Learning Credit, of up to $2,000 per household, or a tuition-and-fees deduction of up to $4,000.

Parents of college freshmen and sophomores from the seven Midwestern states affected by 2008’s flooding disaster (Arkansas, Illinois, Indiana, Iowa, Missouri, Nebraska, and Wisconsin) should opt for the supercharged Hope Credit, which gives up to $3,600 per qualified students from those states.

Home Buyer’s Credit

For those of you who bought their first home in 2009, you may claim a tax credit worth 10% of the cost of your house, up to a limit of $8,000, depending on your income. Note that a first-time home buyer is someone who didn’t own a principal residence for at least three years prior to purchasing a house in 2009.

Different income eligibility rules apply depending on the time of purchase of the house. If you purchased it before November 7, 2009, you are eligible for the full first-time home buyer’s tax credit if you are single and have an income less than $75,000 or if you are married and your joint income didn’t exceed $150,000. The credit decreases progressively for single individuals with incomes up to $95,000 and married couples with joint incomes up to $170,000, then disappears above those income levels.

For those who bought homes on or after November 7, 2009, limits are higher. Also, a new 10% credit, with a limit of $6,500, is accessible to long-time homeowners who purchased a new principal residence on or after November 7, 2009. The full home-buyer credits are available to individuals with incomes up to $125,000 or to married couples with joint incomes up to $225,000.

Home-Energy Credits

We often preach the benefits of making your home energy efficient. Here is another benefit: Those of you, who weatherized your home or bought alternative-energy equipment in 2009, may qualify for either of two expanded home-energy credits, regardless of your income.Renovation

You may claim a credit worth 30% of the cost of eligible home improvements on your principal residence (up to $1,500), as well as labour costs for installing them. High-efficiency heating and air-conditioning systems, water heaters and stoves used for home heating are a few eligible home improvements for the credit. Energy-efficient windows, doors, skylights and insulation are also eligible, but their installation costs are not.

A second tax credit is designed to encourage investment in alternative-energy equipment, such as solar electric systems, solar water heaters or wind turbines, in new and existing homes. The credit is worth 30% of the cost, including installation, with no cap on the amount of the credit!

Jobless Benefits

Unemployed workers are allowed to exclude the first $2,400 of unemployment benefits received in 2009.

Based on Mary Beth Franklin’s article “Tax Breaks for Almost Everyone”