CCH has provided a list of the biggest tax breaks from last year that individuals can take on their 2009 tax returns.
Some of the tax breaks will continue to benefit taxpayers in 2010, but others have expired and as yet have not been renewed. Most of the changes were part of the stimulus legislation passed last year.
1. Wage earners get a Making Work Pay refundable tax credit for the 2009 and 2010 tax years equal to 6.2 percent of taxable wages, to a maximum of $400 for single filers or $800 for joint filers. The catch you have to fill out a new schedule (Schedule M) to make sure you get it, and some people are finding they have to give back part or all of the credit they received through lowered withholding.
2. The American Opportunity Tax Credit for higher education expenses for the 2009 and 2010 tax years provides a maximum credit amount of $2,500, figured as 100 percent of eligible expenses to $2,000 plus 25 percent of expenses above $2,000. The credit can be used for expenses incurred in up to four years of study, including course materials. It phases out with modified adjusted gross income (AGI) between $80,000 and $90,000 for single filers, or $160,000 and $180,000 for joint returns; 40 percent of the credit is refundable.
3. The maximum first-time homebuyer 10-percent credit amount has been increased to $8,000 and the requirement that the credit be repaid has been removed. For purchases after November 6, 2009, price of homes capped at $800,000; income phaseouts raised to $225,000 - $245,000 for joint filers, $125,000 - $145,000 for others; maximum $6,500 credit available for qualifying existing homeowners purchasing new principal residence.
4. Buyers of a new car, motorcycle, light truck or mobile home on or after February 17, 2009 and before January 1, 2010 get a deduction for sales tax attributable to the first $49,500 of the purchase price. The deduction phases out with modified AGI $125,000 - $135,000 for single filers, $250,000 - $260,000 for joint filers.
5. The phaseout range of the Earned Income Tax Credit, or EITC, was raised to benefit married couples with children.
6. EITC-eligible taxpayers with three or more children may also see an increase on their 2009 returns.
7. The refundable portion of the $1,000-per-head Child Credit was liberalized to expand the number of people who can take full advantage of the refundable credit.
8. Unemployed workers were allowed to exclude the first $2,400 of unemployment benefits for 2009.
9. Dollar limitations on credits for certain small wind property, solar water heating and geothermal heat pumps were removed.
10. Credits for improvements to energy-efficient existing homes have been extended through 2010 and uniformly set at 30 percent; item-by-item dollar caps have been eliminated and replaced an overall $1,500 lifetime cap.
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