The Individual Investor's Guide to Personal Tax Planning for Tax Year 2009

The Evolving Tax Landscape

The federal tax landscape has undergone a series of changes in the past decade. Various legislation has left a complicated array of changing tax rates and benefit phase-out levels—all of which will expire in 2010. More change is likely to occur within the next few years, but the contours of the change are uncertain.

That leaves taxpayers with considerable uncertainty even before 2010, which makes planning difficult.

The most recent major tax law changes were passed in the stimulus bill last February, the American Recovery and Reinvestment Act of 2009, which was written in response to last year’s economic crisis. It contained numerous tax provisions that affect individual taxpayers, including:

• Raising the alternative minimum tax exemption amount in 2009 to $70,950 for married taxpayers filing jointly and $46,700 for single and head of household taxpayers. However, this is a one-year patch only, and unless further legislation is passed, for 2010 the exemption amount will drop back to $45,000 for married taxpayers filing jointly, and to $33,750 for single and head of household taxpayers.
• A deduction for state and local sales taxes for motor vehicles bought after February 16, 2009.
• Credits for plug-in electric cars bought or placed in service in 2009.
• A first-time homebuyer credit of as much as $8,000 for homes bought after April 9, 2009, and before December 1, 2009 (subject to a phase-out for higher income taxpayers).
• Expanded definition of education expenses for 529 Education Plans now includes computers and computer technology.
• The $3,500 or $4,500 voucher under the “cash for clunkers” program to buy or lease a new fuel-efficient car is not taxable for federal income tax purposes.
• You can receive up to $5,000 of U.S. Series I Savings Bonds as part of your income tax refund without setting up a Treasury Direct account in advance.

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