by B. Leslie Baird

Created on: December 27, 2009   Last Updated: February 26, 2010

Many changes have been made for the 2009 tax year which is filed in 2010. Some of these changes will also be in place for the 2010 tax year that is filed in 2011. Most, but not all, of these changes will benefit the average taxpayer. The American Recovery and Reinvestment Actof 2009 is where most of these changes have come from. As a taxpayer you should try to familiarize yourself with as many of these changes as possible to be sure you receive as much tax credit and refundable credit as possible. Even if you use a paid tax preparer it is wise to know how the changes effect you.

E.I.C.:

The Earned Income Credit has been modified so that more taxpayers will be able to make use of the credit. This credit has also been expanded to allow credit for up to three children instead of the previous two maximum. The adjusted gross income phase out limits have been raised and an adjustment has been made to the married filing jointly portion to remove the previous marriage penalty.

The Child Tax Credit and additional Tax Credit rules have also changed to allow for the use of more of the previously unused portion by more taxpayers and more tax payers should be eligible for the credit.

Education credits and refunds:

Major changes have been made for credits and refunds for continuing education. The American Opportunity Credit has been instated to allow for up to four years of degree costs compared to the Hope allowance of two years. The amount of credit has increased from $1800 to $2500. Books, computer hardware and software are also now included as qualifying expense items.

The Hope Credit now allows 100 percent of the first $2000 of eligible expenses and 25 percent of the second $2000 of eligible expenses for each eligible student.

The Lifetime Earning Credit has been expanded to include computer hardware, software and Internet access. This expansion will also be good in the 2010 tax year.

Energy Credits:

Energy credits for home energy efficiency improvements have been increased to $1500. The percent of cost credit has also been increased to 30 percent and the taxpayer may rollover some of the unused portion of their credit to the next tax year until the amount of credit has been fully used. This portion of the tax changes will also be good in the 2010 filing year.

First-time Home buyer Credit:

This credit has been raised and extended and extra provisions have been included for active duty military personnel. Military personnel may receive an extension to

• 1
• 2
• Next Page >>