Here are a few tax law changes you may want to note before filing your 2009 federal tax return:
1. Expiring Tax Breaks Renewed
The following popular tax breaks were renewed for tax-year 2009:
- Deduction for state and local sales taxes on Form 1040 Schedule A, Line 5
- Educator expense deduction on Form 1040, Line 23 or Form 1040A, Line 16
- Tuition and fees deduction on Form 8917
In addition, the residential energy-efficient property credit is extended through 2016. In general, solar electric, solar water heating and fuel cell property qualify for this credit. Starting in 2008, small wind energy and geothermal heat pump property also qualify. Starting in 2009 through 2010, qualified energy efficient windows, doors, air conditioning units, heat pumps, water heaters, insulation, roofing, etc. also qualify for the residential energy-efficient property credit.
2. Standard Deduction Increased for Most Taxpayers
The 2008 basic standard deductions all increased. They are:
- $11,400 for married couples filing a joint return and qualifying widows and widowers
- $5,700 for singles and married individuals filing separate returns
- $8,350 for heads of household
Beginning this year, taxpayers can claim an additional standard deduction based on the state and local sales tax paid for the purchase of a new vehicle. The addition of real estate taxes paid added to the standard deduction continues for 2009.
3. Contribution Limits Rise for IRAs and Other Retirement Plans
This filing season, more people can make tax-deductible contributions to a traditional IRA. The deduction is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes between $55,000 and $65,000. For married couples filing jointly, the income phase-out range is $89,000 to $109,000. For married individuals filing separate, the income phase-out range is less than $10,000.
4. Standard Mileage Rates Adjusted for 2009
The standard mileage rates for business use of a vehicle:
- 55.0 cents per mile
The standard mileage rates for the cost of operating a vehicle for medical reasons or a deductible move:
- 24 cents per mile
The standard mileage rate for using a car to provide services to charitable organizations remains at 14 cents a mile. Special rates apply to the Midwest disaster area.
5. Kiddie Tax Revised
The tax on a child's investment income previously only applied to children younger than age 18. It now applies if the child has investment income greater than $1,900 and is:
- Younger than 18
- 19 years of age and had earned income that was equal to or less than half of his or her total support in 2009
- Older than 18 and younger than 24, a student and during 2009 had earned income that was equal to or less than half of his or her total support.
- At least one of the child’s parents was alive at the end of the tax year.
- The child is required to file a tax return for the tax year.
- The child does not file a joint return for the year.
- IRS FS 2009-1 Highlights of 2008 Tax Law Changes
- Form 1040 instructions (PDF 941K)
Publication 526 Charitable Contributions