More workers and working families are eligible for the earned income tax credit. In particular, expanded benefits are now available for those with three or more qualifying children and married couples.
The EITC helps taxpayers whose incomes are below certain income thresholds, which in 2009 rise to $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, and $18,440 for those with no children.
One in six taxpayers can claim the EITC, which, unlike most tax breaks, is refundable, meaning that individuals can get it even if they owe no tax and even if no tax is withheld from their paychecks.
In addition, the earned income formula for the additional child tax credit is revised for tax years 2009 and 2010. As a result, more low and moderate income families qualify for the full $1,000 child tax credit. See Form 8812 for more information.
Nearly two out of three taxpayers choose to take the standard deduction rather than itemizing deductions such as mortgage interest and charitable contributions. The basic standard deduction is: $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; and $8,350 for heads of household, up $350.
Higher amounts apply to blind people and senior citizens. The standard deduction is often reduced for a taxpayer who qualifies as someone else’s dependent.
For tax-year 2009, Congress raised the alternative minimum tax exemption to the following levels: $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; and $46,700 for singles and heads of household, up from $46,200.
Under current law, these exemption amounts will drop to $45,000, $22,500, and $33,750, respectively, in 2010.
It is always recommended that taxpayers consult tax specialists before filing a return.