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What’s New ing jointly or qualifying widow(er)). If • Two children lived with you and you What’s New for 2009 your spouse was covered by a retirement earned less than $40,295 ($45,295 if mar- plan, but you were not, you may be able to ried filing jointly), Making work pay credit. If you have take an IRA deduction if your 2009 modi- • One child lived with you and you earned income from work, you may be able fied AGI is less than $176,000. See pages earned less than $35,463 ($40,463 if mar- to take this credit. It is 6.2% of your earned 31 and 32 for details and exceptions. ried filing jointly), or income but cannot be more than $400 ($800 if married filing jointly). See page • A child did not live with you and you Deduction for motor vehicle taxes. If you 47. earned less than $13,440 ($18,440 if mar- bought a new motor vehicle after February ried filing jointly). 16, 2009, you may be able to deduct any Government retiree credit. You may be state or local sales or excise taxes on the able to take this credit if you get a govern- The maximum AGI you can have and purchase. In states without a sales tax, you ment pension or annuity, but it reduces any still get the credit also has increased. You may be able to deduct certain other taxes or making work pay credit. See page 47. may be able to take the credit if your AGI is fees instead. Take the deduction on Sched- Economic recovery payment. Any eco- less than the amount in the above list that ule A if you are itemizing deductions and nomic recovery payment you received is applies to you. The maximum investment are not electing to deduct state and local not taxable for federal income tax pur- income you can have and still get the credit general sales taxes. If you are not itemizing poses, but it reduces any making work pay has increased to $3,100. See page 48. deductions, these taxes increase your stan- credit or government retiree credit. See dard deduction and are claimed on Sched- pages 29 and 47. Divorced or separated parents. A noncus- ule L. See the instructions for line 40a todial parent claiming an exemption for a beginning on page 35. Cash for clunkers. A $3,500 or $4,500 child can no longer attach certain pages voucher or payment made for such a First-time homebuyer credit. The credit from a divorce decree or separation agree- voucher under the CARS “cash for increases to as much as $8,000 ($4,000 if ment instead of Form 8332 if the decree or clunkers” program to buy or lease a new married filing separately) for homes bought agreement was executed after 2008. The fuel-efficient automobile is not taxable for after 2008 and before May 1, 2010 (before noncustodial parent must attach Form 8332 federal income tax purposes. July 1, 2010, if you entered into a written or a similar statement signed by the custo- binding contract before May 1, 2010). You Buying U.S. Series I Savings Bonds with dial parent and whose only purpose is to can choose to claim the credit on your 2009 your refund. You can now receive up to release a claim to exemption. See page 18. return for a home you bought in 2010 that $5,000 of U.S. Series I Savings Bonds as qualifies for the credit. See page 72. part of your income tax refund without set- Qualifying child definition revised. The ting up a TreasuryDirect® account in ad- following changes to the definition of a You generally must repay any credit vance. For more details, see Form 8888. qualifying child apply. you claimed for 2008 if you sold your home • To be your qualifying child, a child in 2009 or the home ceased to be your main Unemployment compensation. You do not must be younger than you unless the child home in 2009. See the instructions for line have to pay tax on unemployment compen- is permanently and totally disabled. 60 on page 46. sation of up to $2,400 per recipient. Amounts over $2,400 are still taxable. See • A child cannot be your qualifying Credit for nonbusiness energy property. page 27. child if he or she files a joint return, unless You may be able to take this credit for qual- the return was filed only as a claim for re- ifying energy saving items for your home COBRA subsidy. The 65% subsidy for fund. placed in service in 2009. See the instruc- payment of COBRA health care coverage • If the parents of a child can claim the tions for line 52 on page 45. continuation premiums is not taxable for child as a qualifying child but no parent so federal income tax purposes. Credits increased. The following credits claims the child, no one else can claim the have increased for some people. Home mortgage principal reductions. Any child as a qualifying child unless that Pay-for-Performance Success Payments person’s AGI is higher than the highest • Additional child tax credit (line 65). that reduce the principal balance of your AGI of any parent of the child. See Form 8812. home mortgage under the Home Afforda- • Your child is a qualifying child for • Residential energy efficient property ble Modification Program are not taxable. purposes of the child tax credit only if you credit (line 52). See Form 5695. can and do claim an exemption for him or American opportunity credit. The maxi- Standard mileage rates. The 2009 rate for her. mum Hope education credit has increased business use of your vehicle is 55 cents a to $2,500 for most taxpayers. The increased mile. The 2009 rate for use of your vehicle Tax on child’s investment income. The credit is now called the American opportu- to get medical care or to move is 24 cents a amount of taxable investment income a nity credit. Part of the credit is now refund- mile. child can have without it being subject to able for most taxpayers. Claim that part on tax at the parent’s rate has increased to line 66. Claim any other education credits Personal casualty and theft loss limit. $1,900. See Form 8615 on page 38. on line 49. See pages 40 and 72. Each personal casualty or theft loss is lim- ited to the excess of the loss over $500 for Alternative minimum tax (AMT) Elective salary deferrals. The maximum 2009. In addition, the 10% of AGI limit exemption amount increased. The AMT amount you can defer under all plans is generally continues to apply to the net loss. exemption amount has increased to generally limited to $16,500 ($11,500 if $46,700 ($70,950 if married filing jointly Earned income credit (EIC). The EIC has you have only SIMPLE plans; $19,500 for or a qualifying widow(er); $35,475 if mar- increased for people with three or more section 403(b) plans if you qualify for the ried filing separately). children and for some married couples fil- 15-year rule). The catch-up contribution ing jointly. You may be able to take the IRA deduction expanded. You may be limit for individuals age 50 or older at the EIC if: able to take an IRA deduction if you were end of the year has increased to $5,500 (ex- covered by a retirement plan and your 2009 • Three or more children lived with you cept for section 401(k)(11) plans and modified adjusted gross income (AGI) is and you earned less than $43,279 ($48,279 SIMPLE plans, for which this limit remains less than $65,000 ($109,000 if married fil- if married filing jointly), unchanged). - 6 -