Additional Child Tax Credit

The child tax credit has been amended to increase eligibility for the refundable portion of the child tax credit for 2009 and 2010. For both years, the refundable portion of the child tax credit is calculated based on 15 percent of the taxpayer’s earned income in excess of $3,000. In contrast, for 2008, the refundable portion of the child tax credit is calculated based on 15 percent of the taxpayer’s earned income in excess of $8,500.

Credit for higher education expenses

The new American Opportunity Credit modifies the existing Hope Credit for tax years 2009 and 2010, making it available to a broader range of taxpayers; including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses. Many of those eligible will qualify for the maximum annual credit of $2,500 per student – $500 more than the previous maximum credit.

Deduction for taxes paid on new vehicle purchase

Taxpayers who buy a car, light truck, motor home or motorcycle in 2009 may be able to deduct state and local sales and excise taxes they paid on their 2009 income tax returns. This deduction is limited to taxes paid on first $49,500 of the purchase price.

Earned Income Tax Credit

ARRA provides a temporary increase in the Earned Income Credit for a taxpayer with three or more qualifying children, and provides additional marriage penalty relief for 2009 and 2010 tax returns.

Health insurance continuation (COBRA) subsidy

Workers who have lost their jobs may qualify for a 65 percent subsidy from their former employers for COBRA continuation premiums for themselves and their families for up to nine months. Eligible workers will have to pay the remaining 35 percent of the premium to their former employers. To qualify, a worker must have been involuntarily terminated between Sept. 1, 2008, and Dec. 31, 2009, and the former employer must still be in business and offer health benefits coverage.

Residential Energy Efficient Property Credit

Homeowners going green should also check out a second tax credit designed to spur investment in alternative energy equipment. The residential energy efficient property credit, equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property. Generally, labor costs are included when calculating this credit. Also, no cap exists on the amount of credit available except in the case of fuel cell property.

Section 529 plans cover computers.

Funds from section 529 college savings plans can be used to pay for a computer bought in 2009 or 2010, if the computer is used for college work.

Some unemployment benefits tax exempt in 2009

Normally, unemploymnet compensation is taxable. But up to $2,400 in unemployment compensation received in 2009 will be exempt from taxes.

Standard Deductions increases for Most Taxpayers

Nearly two out of three taxpayers choose to take the standard deduction rather than itemizing deductions such as mortgage interest and charitable contributions.

Tax Credits Increased for Low and Moderate Income Workers

More workers and working families are eligible for the Earned Income Tax Credit. In particular, expanded benefits are now available for those with three ore more qualifying children and married couples.

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