Tax Facts for 2009

Tax Facts for 2009

The IRS updates several tax-related amounts each year to take into account the cost of living adjustments due to inflation. Here's a quick summary of all the essential tax figures for the year 2009.

Standard Deductions

Single: $5,700

Head of Household: $8,350

Married Filing Joint: $11,400

Married Filing Separately: $5,700

Qualifying Widow/Widower: $11,400

Dependent: $950-$5,700*

Additional Amount if Blind: $1,100 (for married filing joint, married filing separately, or qualifying widow); $1,400 (for single and head of household)

Additional Amount if age 65 or older: $1,100 (for married filing joint, married filing separately, or qualifying widow); $1,400 (for single and head of household).



* Dependents must calculate their standard deduction using an IRS Worksheet.

Personal Exemptions

Per taxpayer and dependent: $3,650



Phaseout of Personal Exemptions

The amount you can claim for personal exemptions starts to be reduced (or "phased out") once you reach certain income thresholds. If your income is within these ranges, your personal exemptions will be reduced. If your income exceeds the amounts listed below, your personal exemption is $2,433.

Single: $166,800 - $289,300

Head of Household: $208,500 - $331,000

Married Filing Joint: $250,200 - $372,700

Married Filing Separately: $125,100 - $186,350

Qualifying Widow/Widower: $250,200 - $372,700



Filing Requirement Thresholds

You are required to file a tax return if your income exceeds the combined total of your standard deduction and personal exemption. Here's the 2009 filing requirement thresholds:

Single: $9,350 ($10,750 if age 65 and over)

Head of Household: $12,000 ($13,400 if age 65 and over)

Married Filing Joint: $18,700 ($19,800 if one spouse age 65 and over; $20,900 if both spouses age 65 and over)

Married Filing Separately: $3,650 (any age)

Qualifying Widow/Widower: $18,700 ($19,800 if age 65 and older)

Retirement Plan Limits

You can save for retirement up to the maximum dollar limit. Maximum contributions vary by the type of retirement plan:

Traditional or Roth IRA: $5,000 ($6,000 if age 50 or older)

SEP IRA: $49,000

SIMPLE IRA: $11,500 ($14,000 if age 50 or older)

401(k) plan: $16,500 ($22,000 if age 50 or older)

403(b) plan: $16,500 ($22,000 if age 50 or older)

457 plan: $16,500 ($22,000 if age 50 or older)

Defined Contribution Pension: $49,000

Defined Benefit Pension: $195,000



*If you fund both a traditional and Roth IRA, your total contribution to cannot exceed $5,000 combined (or $6,000 if age 50 or older).

**SEP IRA contributions are calculated on an IRS worksheet. Your maximum contribution may be less than $49,000.

Standard Mileage Rate for 2009

You can deduct the cost of driving a vehicle for business-use, for traveling to a doctor, when relocating for a new job, or when you are engaged in charitable activities. The 2009 standard rates for mileage are:

• 55 cents per mile for business,

• 24 cents per mile for medical or moving purposes, and

• 14 cents per mile for charitable service

Sources: Internal Revenue Service, Revenue Procedure 2008-66 (pdf), IR-2008-117, IR-2008-118, and IR-2008-131.

Being Charitable in Tough Times

Charitable contributions can fall as much as 2-5% during a recession when adjusted for inflation.  How can you make sure that your favorite charity does not suffer during the current difficult financial times? As many people are faced with an uncertain financial future, we are often unwilling to give as much cash as in the past.  Fortunately, many other avenues are open to charitable givers which do not require opening the check book.

1.   Donate your professional services to your favorite charity such as accounting or legal services.
2.   Make an extra effort to clean out your closets and donate to the needy.
3.   Participate in a jog-a-thon or other charity event in which participants gather sponsors.
4.   Use your creativity and sponsor a new event for your favorite charity such as a fundraising party. Have fun while asking participants to bring items to help others.
5.   Recruit your friends to work on charity projects. 
6.   Use a credit card which contributes to a worthy cause with each purchase. 

Tax Tips

Conversion of IRA's to a Roth

The current limit for conversion of regular IRA's to Roth IRA's is $100,000 per year. However, in 2010, there is no income limit for conversion.

Advantages:

• You can create tax free income in retirement
• Makes sense if you will face the same or higher tax rates in retirement
• Bush tax cuts are due to expire in 2011, deficit makes it unlikely they will be continued
• Leave a larger legacy to your heirs
• Not required to start withdrawing money at 70 1/2
• Not counted in calculation of Social Security taxability

Disadvantages:

• Conversion increases taxable income, may boost tax bracket
• If you use the proceeds to pay the taxes, you will have fewer dollars growing
• Must have funds available to pay taxes