5 Changes to Federal Income Tax Laws That You Need to Know Now
February 5th, 2010 Filed under: Uncategorized — Accounting Author
Federal income tax laws are always changing. Law makers spend the better part of every year trying to figure out new ways to increase tax revenue. If you are not careful you could easily make a mistake when determining your tax liability. To help you avoid any penalties or fines associated with filing errors, here is a list of five important changes to federal income tax laws that you need to know now.
1. First-time Homebuyer Credit – This credit is perhaps the most popular of the credits available this year. To qualify for this $8,000 tax credit (or $4,000 if you are married filing separately) a taxpayer cannot have owned another principle residence in the last three years.
Additionally, eligible homebuyers must have purchased their new home between January 1st and November 7, 2009. This tax credit starts to be phased out for married taxpayers who have modified adjusted gross incomes that exceed $150,000 ($75,000 for individuals).
This tax credit has recently been expanded to include more homebuyers. First-time homebuyers who purchase a home between November 7, 2009 and April 30, 2010 can now have modified adjusted gross incomes of up to $225,000 ($125,000 for individuals) before the credit starts to get phased out.
2. Standard Mileage Rates – Many times employers require individuals to drive their personal cars for company business. This could include items such as requiring employees to pick up the mail, deposit money into bank accounts or to take packages to the post office. When this happens, employees may be allowed to request monetary reimbursement, depending upon the company’s reimbursement policies.
The standard mileage rate for 2009 is 55 cents per mile for all business miles driven. This is the maximum amount that businesses can claim as a deduction and, as such, represents the maximum amount that can be claimed by individuals.
3. Taxation of Unemployment Compensation – As our economy continues its decline more and more people are filing for unemployment benefits. Unfortunately, even these benefits are not exempt from being taxed. For 2009, a taxpayer may exclude only the first $2,400 of benefits received. Any additional amounts are taxed at your current tax rate.
4. Standard Deduction Increases – A majority of Americans take the standard deduction when filing their taxes. Currently, the IRS estimates that two out of every three people who file a return claim the standard deduction. It is fortunate then that the standard deduction amounts have increased yet again. 2009 amounts include:
�Single – $5,700
�Married filing separately – $5,700
�Head of household – $8,350
�Married taxpayers filing jointly / qualifying widow(er)s – $11,400
�Married taxpayers filing separately – $5,700
5. Exemption Increases – Exemptions are items that reduce your overall taxable income. In 2008 each exemption was $3,500. This amount has been increased to $3,650 in 2009. Generally, you can deduct $3,650 for every deduction that you claim. Once you adjusted gross income reaches a certain threshold, however, the amount of each exemption allowed is reduced.
As our federal tax laws continue to evolve it is crucial that you keep up with all of the major changes. Spending a few minutes familiarizing yourself with these changes can potentially save you from having to pay unnecessary penalties and fees.
Always consult a certified accounting professional to ensure you are following the latest rules and regulations.
Dennis has been writing articles online for nearly 2 years. Not only does he like writing about taxes and accounting issues he also enjoys developing product related websites. You can check out a few of his latest websites at hobostyle hand bags and underwater mp3 player.
