Information overload is an understatement when describing the wealth of information an average American taxpayer has to review before they truly appreciate and understand the rules governing the filing of a basic tax return. This year’s return is further complicated by all the changes ushered in with the American Recovery and Reinvestment Act, 2009 and other measures taken by the government to stabilize an evaporating economy.
In order to present this information in a more digestible form the IRS has provided a list of the top changes that may affect the average taxpayer. The list below is a general summary only. If you require more specific information, please contact the IRS of visit the website at www.irs.gov.
1. The American Recovery and Reinvestment Act
ARRA provides several tax provisions that affect tax year 2009 individual tax returns due April 15, 2010. The recovery law provides tax incentives for first-time homebuyers, people who purchased new cars, those that made their homes more energy efficient, parents and students paying for college, and people who received unemployment compensation.
2. IRA Deduction Expanded
You may be able to take an IRA deduction if you were covered by a retirement plan and your 2009 modified adjusted gross income is less than $65,000 or $109,000 if you are married filing a joint return.
3. Standard Deduction Increased for Most Taxpayers
The 2009 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
Taxpayers can now claim an additional standard deduction based on the state or local sales or excise taxes paid on the purchase of most new motor vehicles purchased after February 16, 2009. You can also increase your standard deduction by the state or local real estate taxes paid during the year or net disaster losses suffered from a federally declared disaster.
4. 2009 Standard Mileage Rates
The standard mileage rates changed for 2009. The standard mileage rates for business use of a vehicle:
• 55 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 per mile.
5. Kiddie Tax Change
The amount of taxable investment income a child can have without it being subject to tax at the parent's rate has increased to $1,900 for 2009.
February 3, 2010