Mei-Feng Moe, EA
Mei-Feng Moe (May) is a
Master Tax Advisor certified by
H&R Block. In addition to
giving tax advice and preparing
income tax returns, she has also
been teaching income tax
courses for a number of years.
She is an Enrolled Agent who
may represent clients before
the IRS. She also holds series 6
and series 63 security licenses.
Tax season 2009
How new tax laws affect your tax returns
Your Master Tax Advisor/Mei-Feng Moe
Economic Stimulus Payment
The “Rebate” stimulus payment that you received from the IRS was an
advance payment for the “Recovery Rebate Credit” that may be claimed on
your 2008 tax return. The payment is not taxable but it reduces your credit.
When filing your 2008 return, you will need to have the amount of rebate
received in order to calculate your credit amount.
Recovery Rebate Credit
Based on your 2008 tax information, the credit is figured like the economic
stimulus payment. You are eligible for the credit if your total earned income,
social security benefits, and VA benefits are at least $3,000; or if your total
income is more than $8,950 for single or married filing separately; $11,500 for
head of household; $14,400 for qualifying widow(er); or $17,900 for married
The credit amount is based on your 2008 net income tax liability without
figuring in the child tax credit. The maximum credit is $600 ($1,200 if married
filing jointly.) The minimum credit is $300 ($600 if married filing jointly.) You
can also get an additional $300 for each dependent child under age 17. Keep
in mind that the amount of stimulus payment that you received reduces your
credit. But if you received more stimulus payment than your 2008 credit
amount, you don’t have to pay back the difference.
First-Time Homebuyer Credit
If you bought your main home in the United States after April 8, 2008 and
before July 1, 2009 and did not own a home in the past three years prior to
buying your home, you may be able to claim this refundable credit if the home
was not purchased from a related party and your modified adjusted gross
income is under $95,000 ($170,000 for married filing jointly.) The credit
amount is the smaller of $7,500 ($3,750 if married filing separately), or 10
percent of the purchase price of your home. It works much like an interest-free
loan because the credit must be paid back over a 15-year period starting in
2010 if you claim the credit on your 2008 return.
If you purchase a home in 2009 during the qualifying period, you have the
option of claiming this credit on your original or amended 2008 return, or you
may wait until you file your 2009 return. If the credit is claimed on a 2009
return, the 15-year pay-back period will start in 2011.
Additional Standard Deduction
In addition to the annual increase of standard deduction due to inflation
adjustments, the standard deduction (for taxpayers who do not itemize their
deductions) is increased by the amount of real estate taxes you paid (that
would be deductible on schedule A if you were itemizing deductions), up to
$500 ($1,000 if married filing jointly.)
The standard deduction is also increased by the amount of net disaster
loss from a federally declared disaster. (The 10 percent of adjusted gross
income reduction when calculating personal casualty loss does not apply to
losses that occurred in a federally declared disaster area.)
Capital Gain Tax Rate
For the 2008 tax year only, the 5 percent capital gain tax rate is reduced to
zero. The zero tax applies to long-term capital gain and qualified dividends
that fall in the lower income tax brackets (15 percent and under.) The 15
percent tax rate for long-term capital gain and qualified dividends that fall in
the 25 percent or higher tax brackets remain the same.
Extended Tax Breaks
Several tax provisions that were scheduled to expire at the end of 2007
were renewed for 2008 and 2009. As a result, eligible taxpayers may claim the
credit for DC first-time home buying and the deductions for educator
expenses, qualified tuition and fees, state and local sales tax.
The exclusion of taxable distributions of up to $100,000 from IRA funds
contributed directly to a charity, was also extended through 12/31/09.
The non-business energy property credit for insulation, exterior door and
windows, furnaces, water heaters and other energy-saving improvements to a
main home is not available in 2008 but will return in 2009.
Alternative Minimum Tax
For tax year 2008, Congress raised the alternative minimum tax exemption
amounts to be $69,950 for married filing jointly and qualifying widow(er);
$46,200 for single and head of household, and $34,975 for married filing
The allowance of certain personal credits against the alternative minimum
tax has expired, including child care credit, education credit, mortgage interest
credit and DC first-time home buyer credit.
In the past, this tax applied to children under a certain age with a certain
amount of investment income. If a child’s investment income (defined as all
income other than earned income) is more than $1,800 in 2008, part of the
child’s income may be taxed at the parent’s tax rate. Beginning in 2008, the
Kiddie Tax rule applies to children under age 18, children who were 18 at the
end of the year but did not have earned income that’s more than half of their
support, and full-time students who are over age 18 but under age 24 and did
not have earned income that’s more than half of their support.