Help After Job Loss
The first $2,400 of unemployment compensation will no longer be subject to income tax. At the highest level, that works out to approximately six weeks of tax-free benefits.
There is also a credit to help keep the unemployed enrolled in their healthcare plans. Those who need to use COBRA to keep healthcare coverage will get a break. Instead of paying the entire premium out of pocket, those who involuntarily separate from employment between Sept. 1, 2008, and Jan. 1, 2010, will only have to pay 35% of COBRA coverage and have it treated as paying the full amount.
Breaks on AMT
Congress once again extended the AMT patch that will allow about 26 million taxpayers to escape being hit by the tax. The AMT exemption amount is up to $70,950 for a couple and $46,700 for an individual.
One change will benefit fixed-income investors. For AMT purposes, taxpayers will no longer have to include in income the interest paid on private activity municipal bonds issued in 2009 or 2010.
Energy Efficiency Incentives
"Green" homes. Clients who install solar panels or make other energy efficiency improvements to their homes will receive substantial write-offs for their efforts. A credit of up to 30% is available for expenses incurred in 2009 and 2010.
The maximum credit has been raised from $500 to $1,500, combined over two years, with specific limits for different types of improvements.
For certain green home improvements, there are no longer any dollar caps. The $1,500 cap does not apply to geothermal heat pumps, solar water heaters and solar panels. Wind energy systems and certain fuel cells are also exempt from the cap. You can claim the full 30% of the purchase price for these, and they can be expensive. To see which home improvements qualify, go to www.energystar.gov/index.cfm?c=products.pr_tax_credits.
"Green" cars. Hybrid electric cars now qualify for a tax credit that starts at $2,500 and phases out after the manufacturers sell 200,000 vehicles. The credit is calculated according to the power of the vehicle. If the car has a battery with at least five kilowatt-hours of capacity, your credit is increased by $417. For every kilowatt-hour thereafter, up to 16, you add an additional $417. It could be worth as much as $7,500.
Education
Under the American Opportunity Tax Credit, for 2009 and 2010 only, families can claim a tax credit of up to $2,500 a year for expenses for any year of college. This is a temporary expansion of the Hope Scholarship Credit, which applies only to the first two years of postsecondary education. Expenses eligible for the credit now include books and other course materials.
For the first $2,000 of expenses, you receive a 100% credit. For the next $2,000 you receive a 25% credit, up to $500. This credit begins to phase out for taxpayers with incomes up to $80,000 for individuals and $160,000 for married couples.
The credit has no age restriction, so it could be used for going back to school after being laid off. It is only for undergraduate college or university tuition, however, not graduate school costs.
Also, for 2009 and 2010, money in 529 plans can now be used tax-free for computers and computer technology, including Internet access and software. It does not include video games, unless they are educational in nature.
First-Time Homebuyers
This credit is an extension of the home buyer credit in the 2008 stimulus. It is equal to 10% of the purchase price of a new home bought after 2008 and before Dec. 1, 2009, up to a cap of $8,000 (an increase from $7,500 in 2008). It is available to those with incomes up to $75,000 for individuals and $150,000 for married couples. Unlike last year's credit, this does not need to be repaid unless you sell your home within three years.
Note: It's also for anyone who hasn't owned a home for at least three years.