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New developments on Form 1040 schedules

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in Small Business Tax,Small Business Tax Deduction Strategies

Form 1040 isn’t the only IRS form that’s been updated for 2009 tax returns. Here are several major changes on the accompanying schedules.

Schedule A (Itemized Deductions)

Medical and dental expenses (Line 1): The standard mileage rate for medical-related travel increases to 24 cents per mile (plus related tolls and parking fees).

New motor vehicle taxes (Line 7):
A taxpayer may deduct sales and excise taxes attributable to the first $49,500 of a new vehicle’s price. However, the deduction phases out if AGI exceeds $125,000 for single filers and $250,000 for joint filers. Use the IRS work sheet.

Casualty or theft losses (Line 20):
The usual 10%-of-AGI limit for personal casualty or theft losses doesn’t apply to disaster-area losses. Also, the $100 floor subtracted from each casualty or theft event is increased to $500 for 2009.

Unreimbursed employee expenses (Line 21):
The standard mileage rate for unreimbursed business travel expenses increases to 55 cents per mile (plus related tolls and parking fees).

Total itemized deductions (Line 29):
The reduction of itemized deductions for high-income taxpayers decreases for 2009. It begins if AGI exceeds $166,800 ($83,400 for marrieds filing separately).

Schedule B (Interest and Ordinary Dividends)

Interest (Line 1): Accrued interest on Series E Savings Bonds issued in 1979 must be reported as taxable interest on the owner’s 2009 return—even if the bonds have not been redeemed.

Excludable interest on Series EE or I U.S. Savings Bonds (Line 3): The interest from qualified U.S. Savings Bonds issued after 1989 is exempt from tax if used for higher education. This tax exclusion begins to phase out at an MAGI of $104,900 for joint filers and $69,950 for unmarried filers. See Form 8815, Exclusion of Interest from Series EE and I U.S. Savings Bonds Issued after 1989.

Schedule D (Capital Gains and Losses)

(Part I and Part II): Gain from a 2009 home sale that is attributable to “nonqualified use” of the home after 2008 is not eligible for the home sale gain exclusion. Nonqualified use generally includes any time the property is not used as the taxpayer’s principal residence.

Tip: Other schedules and forms have been changed such as Schedule C, Profit or Loss From Business, and Form 4562, Depreciation and Amortization, reflecting the extended Section 179 allowance of up to $250,000 for tax years beginning in 2009. 

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