Wednesday, January 6, 2010

2009 tax law changes

Plenty of changes to deductions and limits for this year's Form 1040. Here are some to make note of:

Increased personal exemption is $3,650 (up from $3,500 in 2008, will remain $3,650 in 2010).

Increased Standard Deduction:
  • Married filing Joint / Qualifying Widower: $11,400
  • Head of Household: $8,350
  • Single / Married filing Separate: $5,700
Note: Head of Household increases to $8,400 in 2010.

Additional Child Tax Credit
Earned Income amount used to figure the additional child tax credit is 15% of the income that exceeds $3,000 (down from $8,500). To take advantage of this credit, complete Form 8812 and report the total on Form 1040, line 65.

Maximum amount of wages subject to social security tax is $106,800 (up from $102,000)

Standard Mileage Rates: Business purposes is 55 cents per mile; medical reasons and moving expenses is 24 cents per mile; charitable purposes is still 14 cents per mile

IRA contribution limits remain unchanged.

Health Savings Accounts (HSAs)
Maximum deduction is now $3,000 ($5,950 for family coverage). Minimum annual deductible of a high deductible plan is $1,150 ($2,300 for family coverage). Complete Form 8889 and report the deduction on Form 1040, line 25.

"Kiddie Tax"
  • Investment income over $1,900 of a child age 18 or younger will be taxed at the parent's rate on Form 8615.
  • Parents may be able to include on their own return the child's gross income in excess of $1,900 on Form 8814.
New Tax Forms
  • Schedule L – Standard Deduction for Certain Filers
  • Schedule M – Making Work Pay and Government Retiree Credits

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