Maximizing Your 2009 Tax Bracket Benefit

Each year the tax provisions are evaluated to factor in inflationary economic conditions. Recently the Internal Revenue Service announced that it will be adjusting for inflation, this will give rise broadening of personal exceptions and deductions and gives birth to dozens of tax benefits that affect almost every taxpayer. Below are some changes:

There is a $150 increase in the value of each personal and dependency exemption. For 2009 the vale us $3650.

There is a $500 and $250 increase for married couples filing joint and single deductions respectively and a $350 increase for head of a household for the standard deduction. Most taxpayers take the standard deduction rather then creating itemized ones. So for 2009 the standard deductions are $11,400 for married couples, $5700 for single and $8350 for a head of a household.

There is an increase in the tax bracket thresholds for each filing status. The difference between the 15% bracket and the 25% bracket increased by $2800. In the past it was $65,100 and in 2009 it is $67,900.

Those working families with 2 kids or more in the low and middle income level increase $204.

The annual gift exclusion increased $1000 and is $13,000 for 2009.

The amount allowed for adoption is %12,150.

Earned income tax credit is not allowed if the investment income exceeds $3100.

The IRA contribution limits have not changed yet so they stay the same as 2008 but these numbers are related to inflation so they could change.

If you started your first job, you can deduct the moving expenses associated with taking the job.

You would add health/long-term care premiums to your unreimbursed medical expenses and can deduct the amount that exceeds 7.5% of your adjusted gross income.

If you work and have child care- you can claim that even if you are enrolled in a program at work because these programs cap off at $5000 yet expensed up to $6000 qualify.

If you are perusing higher education and make an adjusted gross income of less then $65,000 for singles and $13,000 jointly, you could claim up to $4,000.

You can claim investment and tax planning expenses under miscellaneous items as long as they exceed 2% of your adjusted gross income. In this category you can also include safety deposit box rentals, IRA fees, financial advisor fees, investment periodicals/publications and even phone charges for calls to you financial advisor.

For more information please go to http://www.irs.gov/pub/irs-drop/rp-08-66.pdf

This is the site where I was able to collect the data for this piece.

Hopefully the information above will help you with maximizing benefits when you file your 2009 taxes. It is helpful to know information like this in advance as we wind down 2008 and start fresh in 2009. This information is helpful to take into consideration when you create your 2009 financial plan.