Tax time is right around the corner and there are some tax law changes that everyone needs to be aware of. The IRS has many of the updates already posted on their website. Some of the more popular updates are listed below.

Credits:

For the 2008 and 2009 tax years, the IRS is offering a First-time Homebuyers Tax Credit. This credit applies to primary homes purchased between April 9, 2008 and June 30, 2009. The credit is 10 percent of the home purchase price up to $7,500. The credit is applied against the taxpayer's tax liability. However, because it is a refundable credit, homeowners will still receive the credit even if their tax liability is lower than the $7,500 credit. The downside is that the credit must be paid back in equal installments over a 15 year period, about $500 annually for those receiving the full credit. If the homebuyer sells or loses the home within the 15 year period, the remaining balance is due immediately. To take this credit, a homebuyer must not have owned a home in the last three years prior to purchase and not earn over $95,000.

One of the most popular credits for low to moderate income tax filers is the Earned Income Tax Credit (EITC). The qualifications to receive the credit have not changed much. However, due to a large potential for abuse, the IRS has tightened the due diligence requirements for tax professionals. Starting this filing season, tax preparers will be required to verify more information regarding income, filing status, relationship and residency tests for those claiming dependents that are not their children.

For those tax filers who did not qualify for or did not receive the maximum amount of the 2008 economic stimulus payment, the Recovery Rebate Credit may be available this filing season. The IRS will have a Recovery Rebate Credit Calculator to help taxpayers figure the amount to claim on their 2008 return and How Much Was My Stimulus Payment? to help determine the stimulus payment received.

Deductions:

Now, tax filers don't have to itemize to take a Real Estate Tax Deduction. For many years, those tax filers that pay property taxes, but did not have enough in deductions, had to forgo the real estate tax deduction allotted on the federal 1040 form Schedule A. For the 2008 and 2009 tax seasons, homeowners who otherwise would be unable to itemize will receive an additional standard deduction equal to the amount of real estate taxes paid up to $500 for single filers or up to $1000 for joint filers.

The Tuition and Fee Deductions has been extended again this year. This deduction allows taxpayers to deduct up to $4,000 in qualified tuition and fees from adjusted gross income. Qualified students include the taxpayer, spouse, or child. Taxpayers cannot take both this credit and the Education Credit for the same student in the same tax year. Income limits apply. It is in the taxpayer's best interest to figure out which method provides the most favorable results.

All "Cash" Charitable Contributions must now be documented using bank records, credit card statements or letters from the charitable organization showing the organization's name, date of contribution and the amount contributed.

Educators Out of Pocket Expense Deduction has been extended again this year. This deduction allows teachers, and other educators to deduct the cost of books, supplies, equipment and software used in the classroom. Eligible educators include teachers, counselors, aides, principals and instructors who work 900 hours per school year in a public or private elementary or secondary school. The deduction allows a reduction in adjusted gross income up to $250 whether or not the taxpayer itemizes. Any amounts above this, must be claimed as an itemized deduction under job expenses subject to a two percent floor.

Other IRS Efforts

In an effort to provide relief to homeowners who lost their homes to foreclosure, the IRS will not count forgiven mortgage balances as income. In the past, this forfeiture would have triggered taxable income. Finally, IRS has announced a Tax Lien Relief for homeowners. This effort allows homeowners who have current IRS tax liens that would normally block attempts to refinance or sell their homes to request that the IRS lien take second position to the lender.

For additional information on tax-related topics, visit the IRS website at www.irs.gov or consult your tax professional.