3. Expanded education creditFor 2009 (and 2010, too) the Hope Education credit is replaced by the American Opportunity Credit. The new credit is worth $2,500 per student, based on the first $4,000 of qualifying educational expenses. The Hope Credit only allowed for an $1,800 tax break.
In addition to upping the credit amount, the American Opportunity Credit can be claimed for expenses for the first four years of post-secondary education, versus the first two years of expenses allowed under the Hope Credit.
More expenses can be counted in calculating the new credit. Its income limits are larger, meaning more folks making more money -- up to $90,000, or twice that for joint filers -- can claim at least a partial credit.
And if you claim the American Opportunity Credit but don't owe the IRS, you still might still get a refund. Forty percent of the credit if refundable, which means you could receive up to $1,000 even if you owe no taxes.
4. Enhanced home energy creditsCredit for homeowners who make their homes more energy efficient reappeared in 2009 and in a much more generous incarnation.
Homeowners who make energy-efficient improvements to their existing homes now can claim a credit of 30 percent of the cost of all qualifying upgrades, up to a maximum credit of $1,500. This covers such relatively simple things as adding insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning systems.
If you really want to take the extra energy-efficiency step, more-costly and complex upgrades, such as various solar, wind and geothermal systems, offer a credit of 30 percent of the purchase price with no maximum credit cap. In these cases, the cost of installation also can be used in the credit calculation.
Improvements must meet Energy Star standards and must have been put into service at your home during the tax year.
5. Jobless benefits less taxingLast year was a tough one for many workers. Layoffs hit record levels. Unfortunately, unemployment compensation is considered taxable income. Now, however, the first $2,400 of such benefits are excluded from income.
6. Biking tax breakLast year bicycling commuters were included in the tax code section that allows for employer reimbursement of workplace transportation costs. Thanks to the Bicycle Commuter Act, cyclists now get some of the same type of tax-free fringe benefits as do their motoring co-workers. If a company provides the benefit, which is $20 per month, a worker can put into a special tax-favored account, bicycle commuters can use that money to help defray such costs as the purchase of a bicycle, bike lock, helmet, bike parking fees, shower facilities and general bike maintenance.
7. Deduction for credit card feesIf you pay your income tax (including estimated tax payments) by credit or debit card, you can deduct the convenience fee you are charged for the transaction. You include the fee amount as a miscellaneous itemized deduction on line 23 of Schedule A. This means that the card fee, along with any other IRS approved miscellaneous deductions, must exceed 2 percent of your adjusted gross income before they count. That will limit the value of this break for many filers, but if you do have substantial expenses to claim in this category and charge any tax payments, be sure to add the card fee to the mix.
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