What's New for the 2009 - 2010 Tax Season

Tax Deadline approaching. If you filed an extension you must submit your tax return by October 15, 2010.

American Recovery and Reinvestment Act

The American Recovery and Reinvestment Act provides a temporary increase in the earned income tax credit for taxpayers with three or more qualifying children. The maximum earned income credit is $5,657.

First Time Homebuyers Credit

First-time homebuyers may be able to take advantage of a tax credit for homes purchased in 2008 or 2009. The credit:

Applies to purchases that close after April 8, 2008, and before Dec. 1, 2009.

Applies only to homes used as a taxpayer's principal residence.

Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar.

Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.

The American Recovery and Reinvestment Act of 2009 expanded the first-time homebuyer credit by increasing the credit amount to $8,000 for purchases made in 2009 before Dec. 1.

For home purchased in 2009, the credit does not have to be paid back unless the home ceases to be the taxpayer's main residence within a three-year period following the purchase.

First-time homebuyers who purchase a home in 2009 can claim the credit on either a 2008 tax return, due April 15, 2009, or a 2009 tax return, due April 15, 2010. The credit may not be claimed before the closing date. But, if the closing occurs after April 15, 2009, a taxpayer can still claim it on a 2008 tax return by requesting an extension of time to file or by filing an amended return.

There is a variety of tax credits, deductions and savings plans available to taxpayers with the expense of higher educations.

American Opportunity Credit

The American Opportunity Credit is not available for on the 2008 returns. The new credit modifies the existing Hope Credit for tax years 2009 and 2010. The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less form married filing joint. Maximum credit is $2,500 per student.

Special rules apply to a student attending college in a Midwestern disaster area. For tax year 2009 only, taxpayers can choose to claim either a special Hope credit for up to $3,600 for the student or the regular American Opportunity Credit. 

Updated Sept. 30, 2009

American Samoa -- Victims of the recent Tsunami in American Samoa may qualify for tax relief from the Energy Incentives for Individuals in the American Recovery and Reinvestment Act

Residential Energy Property Credit (Section 1121): The new law increases the energy tax credit for homeowners who make energy efficient improvements to their existing homes. The new law increases the credit rate to 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to $1,500 for improvements placed in service in 2009 and 2010.

The credit applies to improvements such as adding insulation, energy efficient exterior windows and energy-efficient heating and air conditioning systems.

Georgia Severe Storms and Flooding Victims May Qualify for IRS Disaster Relief

Updated Septemper, 25, 2009

Updated 9/28/09 to include Bartow, Catoosa, Coweta, DeKalb, Fulton, Gwinnett, Heard, Newton, Rockdale and Walker counties.

ATLANTA -- Victims of recent severe storms and flooding in Georgia may qualify for tax relief from the Internal Revenue Service.

Following severe storms and flooding beginning Sept.18, the President declared Bartow, Carroll, Catoosa, Chattooga, Cherokee, Cobb, Coweta, DeKalb, Douglas, Fulton, Gwinnett, Heard, Newton, Paulding, Rockdale, Stephens and Walker counties federal disaster areas qualifying for individual assistance.

As a result, the IRS is postponing until Dec. 17 certain deadlines for taxpayers who reside or have a business in the disaster area. The postponement applies to return filing, tax payment and certain other time-sensitive acts otherwise due between Sept. 18 and Dec. 17.

In addition, the IRS will waive the failure to deposit penalties for employment and excise deposits due on or after Sept. 18 and on or before Oct. 5, as long as the deposits were made by Oct. 5.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the Postponement Period.

American Samoa Tsunami Victims May Qualify for IRS Disaster Relief

Following severe storms and flooding on Sept.29, the President declared the Territory of American Samoa a federal disaster areas qualifying for individual assistance.

As a result, the IRS is postponing until Dec. 28 certain deadlines for taxpayers who reside or have a business in the disaster area. The postponement applies to return filing, tax payment and certain other time-sensitive acts otherwise due between Sept. 29 and Dec. 28.

In addition, the IRS will waive the failure to deposit penalties for employment and excise deposits due on or after Sept. 29 and on or before Oct. 14, as long as the deposits were made by Oct. 14.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the Postponement Period. 

Real -Estate Taxes

You may deduct real estate taxes that you paid on real estate that you own that was not used for business, but only if the taxes are based on the assessed value of the property. See publication 530 for more details. 

Personal property taxes

You may deduct the personal property taxes that you paid, but only if the taxes were based on the value alone and were based on value alone and were imposed on a yearly base.

Mortgage Interest

You may deduct the interest you paid on a mortgage loan (Up to 1,000,000) if the loan was used to build, purchase a home or make improvements on your home. If you took out a mortgage loan and used the proceeds for a purpose other than building, purchasing, or making improvements of your home you may deduct the interest paid on the loan (up to $100,000). The loan must be backed by your house.

Gifts to Charity

You can deduct contributions or gifts you gave to organizations that are religious charitable, educational, scientific, or literary purpose. You may also deduct what you gave to organizations that work to prevent cruelty to children or animals.

Unreimbursed employee expenses

You may deduct the part of unreimbursed employee expenses that exceeds 2% of your adjusted gross income.

Examples:

Safety Equipment, small tools and supplies needed for job

Uniforms required by your employer that are not suitable for ordinary wear

Protective clothing required in your work, such as hard hats, safety shoes, and glasses.

Physical examinations required by your employer

Dues to professional organizations and chambers of commerce

Subscriptions to professional journals

Fees to employment agencies and other cost to look for a new job in your present occupation, even if you do not get the job

Certain business use of part of your home

Education expenses 

Education

Educator Expense

The deduction is available to eligible educators in public or private elementary or secondary schools. To be eligible, a person must work at least 900 hours during a school year as a teacher, instructor, counselor, principal or aide. 

Educators may subtract up to $250 of qualified expenses when figuring their adjusted gross income (AGI) for 2005. This deduction is available whether or not the taxpayer itemizes deductions on Schedule A.

Hope & Lifetime Credit

You may deduct expenses incurred for post secondary education for you are a qualifying dependent. You may only claim the education credit for the first two years of the post secondary education.

Student loan interest

You may deduct up to $2,500 paid on a qualified student loan. The amount of interest deducted must be paid on the loan during the tax year. You may claim this deduction if somebody else claims you as a dependent.