Some tax breaks this year...

[R13]

You'll find lots of new deductions, credits and expanded eligibility rules when you prepare your 2009 tax return.

There's no denying that 2009 was a challenging year for millions of Americans. But filling out your 2009 tax return could bring some welcome relief in the form of a big refund. There are a slew of new and expanded tax breaks for home buyers and car buyers, college students and their parents, homeowners who installed energy-efficient improvements, and the unemployed. Together, these tax savings are expected to boost average tax refunds above last year's level of about $2,800, says IRS spokeswoman Nancy Mathis. The sooner you file, the sooner you'll get your money back.

Here are highlights of what's new for 2009 tax returns.


Education Credit

More parents and students can use a federal education credit to offset part of the cost of college under the new American Opportunity Credit. The maximum $2,500 credit is available to eligible taxpayers who paid at least $4,000 in qualified college tuition, fees and required course materials, including books, in 2009. The full credit is available to individuals with incomes up to $80,000, phasing out above that level and disappearing completely at $90,000. (For married couples filing jointly, the full credit is available to those with incomes up to $160,000 and disappears above $180,000.) Those income limits are higher than under the existing Hope and Lifetime Learning credits.

If you claim the credit and owe no tax, you may receive a refund of 40% of the credit, up to a maximum of $1,000 for each eligible student. Other education credits are not refundable. The American Opportunity Credit can be applied only to expenses paid during the first four years of college. Graduate students are not eligible for this new credit, but they still qualify for the Lifetime Learning credit, of up to $2,000 per household, or a tuition-and-fees deduction of up to $4,000. (A credit, which reduces your tax bill dollar for dollar, is more valuable than a deduction, which merely reduces the amount of income that is taxed.)


Parents of some college freshmen and sophomores should bypass the new American Opportunity Credit and opt instead for the supercharged Hope Credit available to students in Midwestern seven states affected by 2008's flooding disaster (Arkansas, Illinois, Indiana, Iowa, Missouri, Nebraska, and Wisconsin). The top credit on 2009 returns for qualified students is $3,600.

Home-Energy Credits

If you weatherized your home or bought alternative-energy equipment in 2009, you may qualify for either of two expanded home-energy credits, regardless of your income.

You may claim a credit worth 30% of the cost of eligible home improvements on your principal residence, up to a maximum $1,500. The cost of certain high-efficiency heating and air-conditioning systems, water heaters and stoves used for home heating qualify for the credit, along with labor costs for installing them. The cost of energy-efficient windows, doors, skylights and insulation also count, but installation costs do not. You would have to spend at least $5,000 to qualify for the full $1,500 credit.

A second tax credit is designed to spur investment in alternative-energy equipment, such as solar electric systems, solar water heaters, geothermal heat pumps and wind turbines, in new and existing homes. The credit is worth 30% of the cost, including installation, with no cap on the amount of the credit.

Home Buyer's Credit

If you bought your first home in 2009, you may be able to claim a tax credit worth 10% of the cost of the house, up to a maximum $8,000, subject to income eligibility rules. You are considered a first-time home buyer if you, or you and your spouse, didn't own a principal residence for at least three years before purchasing a house in 2009.

Different income eligibility limits apply depending on when you bought the house. If you purchased it before November 7, 2009, you are eligible for the full first-time home buyer's tax credit if you are single and your income didn't top $75,000 or if you are married and your joint income didn't exceed $150,000. The credit phases out for individuals with incomes up to $95,000 and married couples with joint incomes up to $170,000, disappearing above those income levels.

Income Eligibility Limits

Limits are higher for those who bought homes on or after November 7, 2009. And a new 10% credit, with a maximum of $6,500, is available to longtime homeowners who bought a new principal residence on or after that date. The full home-buyer credits are available to individuals with incomes up to $125,000 and married couples with joint incomes up to $225,000. The credit is phased out for individuals with incomes up to $145,000 and joint filers with incomes up to $245,000 and disappears for those with incomes above those levels.

Taxpayers claiming either credit on their 2009 returns must use the new Form 5405, "First-Time Homebuyer Credit". If you claim the credit, you cannot file your 2009 tax return online; you must print it out and mail it to the IRS. See more details in our FAQ on the home-buyer credits.

New-Vehicle Purchases

If you bought a new car, light truck, motorcycle or motor home on or after February 16, 2009, through the end of the year, you may be able to deduct the state or local sales tax or excise tax you paid on the vehicle on your 2009 tax return. The deduction is limited to the tax you paid on up to $49,500 of the purchase price of the vehicle, but there is no limit on the number of qualifying vehicles.

To qualify for the full deduction, your income can't top $125,000 if you are single or $250,000 if you are married filing jointly. A partial deduction is available for individuals with incomes between $125,000 and $135,000 (and between $250,000 and $260,000 for joint filers). The deduction is available whether or not you itemize your deductions. If you claim the standard deduction, file the new Schedule L ("Standard Deduction for Certain Filers"). If you itemize your deductions, you can claim the deduction for the sales tax on your vehicle purchase on either line 5 or line 7 of Schedule A.

Jobless Benefits

Unemployed workers are allowed to exclude the first $2,400 of unemployment benefits received in 2009.


tax-breaks-for-almost-everyone: Personal Finance News from Yahoo! Finance

[R13]

White House officials said Monday that tax credits launched under last year's economic recovery bill have boosted the average refund by nearly 10% from the previous year.

The average tax refund for 2009 has reached $3,036, up $266 from a year ago, according to early data from the Internal Revenue Service.

Administration officials said the increase is largely due to tax benefits available under the $787 billion American Recovery and Reinvestment Act. The extra cash is a boon for the middle class and provides an important stimulus for the economy, officials said.

"The Recovery Act is a major factor behind these larger, record refunds," said IRS Commissioner Doug Shulman. "About half of all Americans haven't filed their taxes yet, so we urge them to look carefully at these Recovery provisions."

Under the Recovery Act, which was implemented last year to combat the economic crisis, taxpayers can take advantage of over a dozen tax benefits.

Among the benefits are the making work pay credit, worth up to $800 for married couples filing jointly, the $8,000 first-time home buyer credit, and sales tax deductions on new car purchases.

In addition, the act includes credits for homeowners that make their homes more energy efficient. It also expanded eligibility for a $2,500 tax credit on college expenses and made the first $2,400 of unemployment benefits tax free.

Speaking at a news conference in Washington, Vice President Joe Biden said bigger refunds will help working families recover from one of the worst recessions on record and urged Americans to take full advantage of the credits.

"These Recovery Act tax credits not only provide some needed relief for working Americans, but also help them invest in their families' futures," Biden said.

Treasury Secretary Tim Geithner added that the nearly $300 billion in tax benefits will help the economy recover by encouraging Americans to spend, which will help business and ultimately stimulates job growth.

"The more that individuals and families take advantage of these benefits, the more money is pushed back into the economy, helping all Americans as we grow our way out of this crisis," Geithner said.

However, some critics argue that the bigger tax refunds could be due to factors other than the Recovery Act credits, including a larger number of Americans withholding more last year due to unemployment or other economic hardships.

Individuals who work into the year and get laid off typically over-withheld while they are working, said J.D. Foster, a senior fellow specializing in fiscal policy at the Heritage Foundation, a conservative research group. That over-withholding can lead to larger refunds.

"There are many reasons for refunds to be up and no reason at this point to believe the tax credits from the Recovery Act were a particularly important explanation," Foster said.

2009 tax returns boosted by Recovery Act - Yahoo! Finance

[starbuck]

None of it helped me any

[R13]

None of it helped me any

95% of America got a tax cut, you're in the remaining 5?

[starbuck]

I got about $200 less this year than last year

[R13]

Then you might be one of the ones that weren't aware of the new cuts/credits this year, most households received a tax cut. Nearly every working person qualified for the "Making Work Pay" tax cut, 400 for an individual and 800 for a couple that works..a good example. I've read articles that there are thousands that just forgot to do it, but I'm willing to bet you qualified for that one and probably more.

[Shooter]

I had my employer cut an extra 45 bucks out of every check in 2009 and still ended up 300 bucks short of the previous years return. And yes, I got all of the deductions.

[R13]

I had my employer cut an extra 45 bucks out of every check in 2009 and still ended up 300 bucks short of the previous years return. And yes, I got all of the deductions.

You still got the cuts from this, so without it, you would have been even more in the hole.

PolitiFact | Tax cut for 95 percent? The stimulus made it so

Still got them cut and Obama, nor the Act raised taxes on you...unless you make more than 250k. And that the average household seen a bigger refund this year, 10% more.

[red66]

I bought my first home so I got the first time home buyers credit. Will be getting a nice fat check in the mail here in a few weeks.

[1inStripes]

I built a home, but because it was stick built on my own thru a contractor, instead of purchased as a turnkey lot and moved in before Nov. I did not qualify for the $6500 home buyer credit.