Highlights of the 2009 tax changes as they relate to your personal income tax are below.

Homeowners credits abound and now apply to existing homeowners as well as first time homeowners.
Congress extended and expanded the first-time homebuyer credit. The credit was due to expire November 30, 2009, but has been extended for purchases made before May 1, 2010. A special provision allows a home purchase to qualify for the credit if a binding contract to purchase is in place by April 30, 2010, and the purchase closes before July 1, 2010. The credit for first time homeowners is up to $8,000.

If a homeowner has owned and used the same home as his or her principal residence for 5 consecutive years of an 8-year period, a subsequent home purchase after November 6, 2009, will qualify for a homebuyer credit. The credit for a long-time resident may not exceed $6,500.

Energy credit for the purchase of energy saving property as well as energy generating property are back.
For 2009 and 2010 there is a 30% credit for the purchase of energy saving property such as insulation, windows, doors, heat pumps etc. The aggregate limit for 2009 and 2010 is $1,500 and only applies to purchases for the primary residence.

There is also a 30% credit on the purchase and installation of qualified solar electric, solar water, wind energy, and geothermal heat pumps that are installed and used in connection with the taxpayer’s primary residence. The big change here is that there is no longer any limit to this credit. So, if you pay $30,000 to install solar panels, your credit would be $9,000. If you don’t owe that much in a given tax year, the credit can roll over to the following tax years. This credit is now in place until at least 2016.

A word of caution regarding the sale of real estate.
As of 2009, if your primary residence is ever used for business, that portion of the gain on the subsequent sale of the house is not excluded from capital gains. This is a fairly seismic shift in how the mixed use of a primary residence has been handled in the past. Usage will now be divided into qualified and unqualified use with the unqualified use subject to tax. In order to ease us all into this, the new rule allows all use prior to 2009 to be qualified use.

O.K. All you guys who are converting your old whatever into an electric car, you now get a credit too.
The alternative motor vehicle credit is expanded to include a credit for converting a motor vehicle to a qualified plug-in electric drive motor vehicle. The credit equals 10% of the cost of conversion up to $4,000. New electric cars are eligible for a credit up to $7,500.

A few quick notes:
• Unemployment compensation is tax free for the first $2,400.
• The HOPE Education credit has been renamed the American Opportunity Tax Credit and is now up to $2,500 for the first four years of qualifying higher education.
• Sales tax paid on the purchase of a new car can be deducted even if you don’t itemize. The rule applies to the first $49,500 of the purchase price.

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