American Opportunity Credit Helps Pay for First Four Years of College. Eligible may qualify for max of $2500.

Books are eligible for credit/deduction.100 percent credit  for first  $2000 , 25 percent for next $2000, thus total of $2500.

Full credit for modified gross  income of $80,000 or less(160,000 for a joint return).

Energy Improvements Qualify for Expanded Tax Credits.

Non-business Energy Property Credit.Max of $1500 or 30% of dollars spent on eligible improvements

Residential Energy Efficient Property Credit. Home owners going green can get second credit.Solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property.

Qualifying property purchased for new construction or an existing home is eligible for the credit. Generally, labor costs are included to work out the cost.

New Vehicle Purchase Incentive.deduct the state or local sales or excise taxes paid on the purchase of new cars, light trucks, motor homes and motorcycles.

No limit on the number of vehicles purchased, and eligible taxpayers may claim the deduction for taxes paid on multiple purchases. The deduction is limited to the tax on up to $49,500 of the purchase price of each qualifying new vehicle.

Qualifying new vehicles must be purchased, not leased, after Feb. 16, 2009, and before Jan. 1, 2010.

Tax Credits Increased for Low and Moderate Income Workers.More workers and working families are eligible for the Earned Income Tax Credit.

$48,279 for families with three or more qualifying children.$45,295 for those with two or more children.40,463 for people with one child.$18,440 for those with no children

Standard Deduction Increases for Most Taxpayers.$11,400 for married couples filing a joint return and qualifying widows and widowers, a $500 increase compared with 2008. $5,700 for singles and married individuals filing separate returns, up $250.$8,350 for heads of household, up $350.

AMT Exemption Increased for One Year.

$70,950 for a married couple filing a joint return and qualifying widows and widowers, up from $69,950 in 2008.$35,475 for a married person filing separately, up from $34,975.$46,700 for singles and heads of household, up from $46,200.

Other Changes.

The standard mileage rate for business use of a car, van, pick-up or panel truck is 55 cents for each mile driven. The standard mileage rate for the cost of operating a vehicle for medical reasons or as part of a deductible move is 24 cents per mile. The rate for using a car to provide services to charitable organizations is set by law and remains at 14 cents a mile.

Unemployment benefits up to $2,400 received in 2009 are tax free for unemployed workers. Every person who receives unemployment benefits can exclude the first $2,400 of these  benefits on their return.

Unemployment benefit amounts over  $2,400 are taxed.

For detailed reading:American opportunity  credit

Eligible taxpayers can use a Federal Education Credit to offset part of the cost of college under the new American opportunity Credit. This credit modifies the existing Hope credit for tax years 2009 and 2010.Credit Helps  Pay for First Four Years of College. Tax credits/deductions are now avalable to broader range of tax payers as income guidelines have been expanded.

Max annual credit  of $2500 will be allowed. In addition to tuition,related fees, Books will  also be eligible for tuition/credit   deductions . Credit will be 100 percent for first $2000, and 25 percent for next  $2000.

Full credit is available for taxpayers whose modified adjusted gross income (MAGI) is $80,000 or less ($160,000 or less for filers of a joint return). The credit is reduced or eliminated  for taxpayers with   income  above these   levels.

Forty percent of the American opportunity credit is  refundable. This means that even people who owe no tax can get an annual payment of the credit of up to $1,000 for each eligible  student. 

The refundable  portion of the credit is not available to any student whose investment income is taxed, or may be taxed, at the parent’s rate, commonly referred to as the kiddie tax. See Tax Rules for Children and Dependents. for details: See Publication 929

Most taxpayers who pay for post-secondary education qualify for the American Opportunity Credit, some do not. The limitations include a married person filing a separate return, regardless of income, joint filers whose MAGI is $180,000 or more and, finally, single taxpayers, heads of household and some widows and widowers whose MAGI is $90,000 or more.

Students with more than four years of post-secondary education still qualify for the lifetime learning credit  and the tuiti0n and fees and deduction.

For details on these and other education-related tax benefits, see Publication 970, Tax Benefits for

Link :American Opportunity Credit.

The Internal Revenue Service along with its  partners are making Free File available starting Jan15. Using the software, most taxpayers can have  free electronic filing of the federal tax return.

This free filing software, makes it easier, to find all the new tax breaks this season, tax credits and deductions they are due. Taxpayers must go through www.IRS.gov homepage or www.IRS.gov/freefile to access the free options.

Free File is a g00d choice for  the novice as well as the  experienced taxpayers. It’s fast, safe and free.

Tax payers  who meet the $57,000 income limit, are eligible for the user-friendly Traditional Free File. Traditional Free File provides step-by-step software help that asks simple questions and puts the answers on the correct tax forms.

Traditional Free File can help taxpayers identify new tax credits or deductions under the American Recovery and Reinvestment Act. There are many new and expanded benefits for energy conservation, new car purchases, college tuition and first-time homebuyers.

Taxpayers must go through IRS.gov to access Free File. Each partner company sets its own eligibility criteria. For example, generally, eligibility criteria are based on state residency, age, income or military service. However, an individual or family with income of $57,000 will find tax preparation software they can use.

Taxpayers either can read over the company offers by clicking “I Will Choose a Company” or get a little help in making the selection by clicking “Help Me Find a Company.” With a little information, the tool will display those company offers for which taxpayers may be eligible.

For taxpayers who are comfortable preparing their own tax returns, there’s Free File Fillable Forms. Almost everyone is eligible for this service. There are no income limits and almost all tax forms are available.

Tax payers can complete the forms online and file electronically. The fillable forms perform simple math functions, but do not use the question-and-answer software format. Free File Fillable Forms does not support state forms or state electronic filing.

Taxpayers who use Traditional Free File or Free File Fillable Forms can enjoy all the benefits of IRS e-file – also for free.

By using the free e-file option, taxpayers also get the benefits of a fast refund, reduced error rate and a quick acknowledgement. By using e-file and direct deposit, taxpayers can get a refund in as few as 10 days.

If people owe taxes, they also can control their payments and set a date such as April 15 for electronic payment.  Unlike paper filers, e-filing taxpayers also will receive an acknowledgement that the IRS has received and accepted or rejected their returns.

Taxpayers who are eligible for the $8,000 or the $6,500 first-time homebuyer credit will not be able to e-file because they must attach proof of purchase to their tax return. However, these taxpayers still can use Free File to prepare their tax forms and then print and mail the returns to the IRS.

Free File is available 24-hours a day through April 15. For taxpayers who request an extension to file their federal returns, Free File will be available through October 15.

Cobra subsidy eligibility period has been extended upto end of February,according to a release issued by IRS.15 months subsidy is now available for those who qualify.

Workers who lose their jobs during January and February may qualify for a 65-percent subsidy on their COBRA health insurance premiums, and these newly-eligible individuals, along with those already receiving the subsidy, can now receive it for up to 15 months.

According to the American Recovery and Reinvestment Act of 2009, the COBRA subsidy eligibility period was originally scheduled to expire on Dec 31, 2009. Eligible individuals only qualified for the subsidy for nine months.

Department of Defense Appropriations Act, 2010, enacted on Dec. 19, extended the eligibility period and the maximum duration of COBRA premium assistance.

Involuntarily terminated from employment between Sept. 1, 2008, and Feb. 28, 2010, workers may be eligible for a 65-percent subsidy of their COBRA premiums for a period of up to 15 months.

Employees, involuntarily terminated ,who meet certain other requirements, and certain family members of those individuals, are referred to as “assistance-eligible individuals.”

Employers must provide COBRA coverage to assistance-eligible individuals who pay 35 percent of the COBRA premium. Employers are reimbursed for the other 65 percent by claiming a credit for the subsidy on their payroll tax returns.

Form 941, Employers QUARTERLY Federal Tax Return, Form 944, Employer’s ANNUAL Federal Tax Return, or Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees may be used. Employers must maintain supporting documentation for the claimed credit.

The administrator of a group health plan or other entity must notify certain assistance-eligible individuals of the extension by Feb. 17, 2010. For assistance-eligible individuals whose nine months of subsidy had already ended, the new law also provides an extended period for the retroactive payment of their 35 percent share during a transition period.

For more information about the COBRA subsidy:read COBRA pages of IRS.gov.

The Internal Revenue Service  released  on  Jan 15, the new form that eligible homebuyers need to claim the first-time home buyer credit this tax season and announced processing of those tax returns will begin in mid-February.

The IRS also announced new documentation requirements to deter fraud related to the first-time home buyer credit. The new form and instructions  follow major changes in November to the home buyer credit by the Worker, Home ownership, and Business Assistance Act of 2009.

The new law extended the credit to a broader range of home purchasers and added new documentation requirements to deter fraud and ensure taxpayers properly claim the credit.

With the release of Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, and the related instructions, eligible homebuyers can now start to file their 2009 tax returns.

Taxpayers claiming the homebuyer credit must file a paper tax return because of the added documentation requirements.

In addition to filling out a Form 5405, all eligible homebuyers must include with their 2009 tax returns one of the following documents in order to receive the credit:

A copy of the settlement, or a copy of the retail sales contract in case of Mobile Home purchase.For newly constructed house a copy of the certificate of  occupancy. Taxpayers claiming early for the credit may see a tax refunds in two to three weeks.

More details on claiming the credit can be found in the instructions to Form 5405, as well as on First-Time Homebuyer Credit page on IRS.gov.

Dropping  Jan  temperatures, bring some warmth for the first time home buyers. Full credit is available for married couples filing a joint return whose MAGI (Modified Annual Gross Income) is $150,000 or less and for other taxpayers whose MAGI is $75,000 or less, for purchases on or before Nov 9,2009. For purchases after Nov 9, 2009, married couples 225 K to 245K and for other tax payers 125 K to 145K.

FOR 2008  HOME PURCHASES

A tax credit for the first time home buyers that can be worth up to $7500.00 for homes purchased in 2008, the credit is similar to a  no interest  loan and must be repaid in 15 equal installments, beginning with the 2010 tax year.

FOR  2009     HOME PURCHASES

The credit was expanded in 2009 for homes purchased in 2009, increasing the amount to $ 8000.00, and eliminating the requirement to repay the credit, unless the home ceases to be your principal residence within the 36-month period beginning on the purchase date.

FOR   2010  HOME PURCHASES

Deadline for a credit of up to $8000.00  is now extended. Home owners who have  a binding contract to purchase  a home before May 1, 2010, are eligible for the credit. Buyers must close on the home before July1, 2010.

Credit of $8000.00, need not be paid back, unless the home ceases to be the main residence of tax payer, within a period of three year, following the purchase.

Credit applies to the main residence of the tax payer,reduces his/her tax bill or increases his/her refund dollar for dollar.This  is fully refundable ,meaning  the credit will be paid out to the eligible tax payer,even if they owe no tax or the  credit is more than the tax owed.

Credit is claimed using  Form 5405 which you file with your original or amended return.