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2009 U.S. Individual Income Tax Changes: An Introduction

Updated on October 20, 2009

The Most Wonderful Time of the Year

I know, I know, you're saying to yourself, "Self, it's not tax time yet! This guys crazy." And you're right I probably am. But as the end of the year approaches, it is a great idea to start thinking about what's coming up. Think about all the tax planning issues you've meant to start but haven't quite gotten to yet. Now's the time, do it before the holiday's are in full swing and you lose track of it.

What I really want to get into are some of the changes in the U.S. tax law for the 2009 year. This is for individuals, not business. And remember, you don't know me, I don't know you, so the items I present are for general information only. An FYI, it you will. For specific details on how these changes will affect you, speak with your accountant or tax preparer. My hope is that, armed with the information I give you, you'll be able to find ways to apply  these items to your taxes, and put a little more money in your pocket.So, let's get started.

Suffer the Little Children

Now, the IRS spends an awful lot of time coming up with new and exciting ways to separate money from the American public, and I have faith that, had 2009 been a normal year, they would have been in fine form. The problem though is that the citizens are already pretty well tapped out so the agency has done something a little different: they've come up with ways to help you save some money.

Definition of Qualifying Child Revised

To begin, they redefined child:

  • To be your qualifying child, the child must be younger than you.
  • A child cannot be your qualifying child if he or she files a joint return, unless the return was filed only as a claim for refund. So if your child is married, they can't be claimed by you.
  • If the parents of a child can claim the child as a qualifying child but don't, no one else can claim the child as a qualifying child unless that person's adjusted gross income (AGI) is higher than the highest AGI of either parent of the child.
  • Your child is a qualifying child for purposes of the child tax credit only if you can and do claim an exemption for him or her. If you don't list them for the exemption, you can't take the credit.

Adoption Benefits Increased

Have you decided to add to you family through adoption? The maximum adoption credit and maximum exclusion from income in 2009, under your employer’s adoption assistance program, have increased.

For 2009, the maximum adoption credit has increased to $12,150, from $11,650 in 2008. And, the maximum exclusion from income for benefits under your employer's adoption assistance program has increased to $12,150. These amounts are phased out once your modified AGI reaches $182,180 and you cannot claim the credit or exclusion if your modified AGI is over $222,180.

Child's Investment Income

Even your children get a chance to save money. The amount of taxable investment income a child can have before it is subject to tax at the parent's rate has increased to $1,900 for 2009. Now, this applies to children who have investment income of more than $1900 and meet one of the following three age requirements:

  1. The child is younger than 18.
  2. The child is 18 and has earned income that does not exceed one-half of their own support for the year.
  3. The child is older than 18 and younger than 24 and a full-time student with earned income that does not exceed one-half of the child’s support for the year.

Form 8615 is used to figure the child's tax. These rules also apply to parents who elect on Form 8814 to report their child's income on the parents' return.

That's It?

Yes, that's about it for children. Your child gets redefined, gets to save a little more and you can spend more to help adopt a new child. The item that really caught my eye way the part that your child had to be younger than you to get the credit. I wonder who went to the IRS and told them "Yes, he's 40, and I'm 30, but he's always going to be my little boy." Next I want to take a look at a topic near and dear to my heart, education credits. There are some changes in the Hope and Lifetime Learning credits that really make this a great time to have been in school.

*Disclaimer* I said it once but it bears repeating. I'm not a CPA, nor a tax professional, yet. But I think that knowing what's happening with taxes, and having an idea of what laws are being implemented is valuable for us all. If you think that there's something here that may affect you, talk with your tax professional. If you are a tax professional and think that something here is incorrect, or would like to see something added, please contact me. I love feedback and suggestions. If there's a topic you'd like to see me tackle, let me know. I'll try anything once. 


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    • nicomp profile image

      nicomp really 8 years ago from Ohio, USA

      "To be your qualifying child, the child must be younger than you."

      Changes to the tax code sometimes arise as a response to filers who bend the rules. This one surely has some interesting history behind it.

      My favorite loopholes are the tax breaks given to people who worked 'on the railroad all the livelong day'. Perhaps they needed special help a hundred years ago, but probably not these days. ;)