9 Tax Changes Affecting Individuals for 2009

Each new year brings new tax law change.  Some years for the better and some for the worse.  All of this is usually a matter of  opinion on how it affects you directly, of course. The biggest one affecting me, or more so my clients; is the suspension of the Required Minimum Distributions for 2009.  Personally, I would have liked this suspended for 2008, but that’s a whole other rant.   2009 has seen some key federal tax changes that will affect individual filers.  Here is a brief rundown of those changes.

1. RMD’s Suspended

For taxpayers age 70½ and older, required minimum distributions from individual retirement accounts and other retirement plans can be skipped without penalty. The same rules apply to heirs of inherited IRAs.

2. Home Away From Home

There are new rules on turning a second home into a main residence and then attempting to sell that home and take advantage of a $250,000 tax exemption ($500,000 for married couples). The new rules will make some of the gain ineligible for this exclusion. The amount that would be taxable is based on the ratio of time after 2008 that the home was used as a second home or rental property to the total time the seller owned the home.

The balance of gain remains eligible for the exclusion.

3. We Have a Casualty

A casualty loss is a type of tax loss that is a sudden, unexpected, or unusual event. Casualty losses are now subject to a $500 floor, up from $100 in 2008.

4. Give Me an “E-E”

Income caps are raised for tax-free EE bonds used for education purposes. In order to qualify, parents who are married must file a joint return. The exclusion starts phasing out at $104,900 of adjusted gross income and is gone when AGI reaches $134,900 (the range for single filers is $69,950 to $84,950).

5. You Are Exempt

Is estate planning a concern of yours?  The estate tax exemption has gone up from $2 million to $3.5 million, but the tax rate remains at 45%. Keep in mind that is in effect until 2010 when the provision sunsets.  It still is remain to be seen what will happen after 2010.

6. A Gift To You

For the philanthropists out there that love to give, life just got sweeter. The annual gift tax exclusion has been raised from $12,000 to $13,000. So give away to your hearts content.

7. Need a Passport?

Have you considered working overseas?  U.S. taxpayers working abroad have a higher exclusion tax this year. It is now $91,400.  That’s nice chunk to take home tax free.

8. Going For a Drive

The standard mileage rate for business driving for 2009 is now 55 cents per mile, and 14 cents a mile for miles driven for charitable purposes.  For me, this is a bit of a drop from last year. It shouldn’t make much of a difference.

9. Need Some Energy?

There are some major changes for energy-related issues, including a more generous tax credit of 30% for the full cost of installing home solar power systems. There are new tax credits for small wind turbines for residential or business use and biomass stoves. The solar and wind residential tax credit can be claimed against the alternative minimum tax as well. The new bicycle tax credit allows employers to reimburse employees up to $20 a month for expenses related to bicycle commuting. As always, every person’s situation is unique and all changes in tax code should be considered when it comes time to file a return. Keeping yourself  informed of tax law changes will help ensure to make the necessary changes in your financial situation.  Whether you use H & R Block Tax Cut or not, please consult your tax advisor to address any of your tax needs.

*10. Cash For Clunkers Program

A  new program called the Cash For Clunkers passed that allow people to trade in old cars that are not fuel efficient for more eco-friendly vehicles. To participate in the program you just have to buy a new car from a participating new car dealership.  The incentive amount that you qualify for will be applied to the new vehicle’s purchase price.  You won’t receive an actual check or voucher.  The program will run from July 1, 2009 to November 1, 2009.

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Tagged as: 2009 tax law changes individuals, 2009 taxes