New Tax Provisions for the 2009-2010 Tax Years

Legislative Column by Assemblyman Marc W. Butler (R,I,C – Newport)

August 28, 2009

Due to the complexity of our tax code, tax season is always a stressful time of year, leaving many to dread the April 15 deadline. In order to avoid any additional stress during this hectic time, I wanted to alert my constituents of new tax provisions that the Internal Revenue Service (IRS) is implementing as a result of the American Recovery and Reinvestment Act of 2009 being signed into law this past February. The sooner you look into how these provisions will affect you and your family, the sooner you can take advantage of certain tax credits and make the necessary changes to ensure that you will not end up owing the IRS money in April. A summary of the changes are below:

• Making Work Pay – A refundable tax credit of up to $400, or $800 if filing a joint return;
• First-Time Homebuyer Credit Amended – A refundable tax credit of up to $8,000 for homes purchased before December 1, 2009 (criteria apply);
• Money Back for New Vehicle Purchases – A deduction for state, local, sales, and excise taxes or other fees paid when buying a new car, light truck, motor home or motorcycle from February 17 through December 31, 2009;
• Temporary Increase in Earned Income Tax Credit – Increases to income limits and credit percentages for working families with three or more qualifying children;
• Temporary Increase in Refundable Portion of Child Tax Credit – Reduces the minimum earned income tax amount used to calculate the additional child tax credit to $3,000;
• Up to $2,400 in Unemployment Benefits Tax Free in 2009 – For the year of 2009, taxpayers can exclude up to $2,400 of unemployment compensation;
• The American Opportunity Tax Credit – Hope Credit extended two years, and up to $2,500 of allowance expenses may be refundable;
• Qualified Opportunity Tax Credit – For 2009 and 2010 qualified expenses for higher education tax free distributions is expanded; and
• Residential Energy Credits – 30% break of up to $1,500 for adding qualifying improvements placed into service in 2009 and 2010.

The majority of these tax provisions will affect tax years 2009 and 2010, which means the tax returns that will be due on April 15, 2010 and 2011. If you have any questions about the new IRS tax provisions, or would like to know if you qualify for any of the above tax credits, you can visit the IRS’ website at www.irs.gov or contact Assemblyman Butler at 315-866-1632 or 518-762-6486.

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