FIRST-TIME HOMEBUYER CREDIT. If you buy a personal residence between April 9, 2008, and June 30, 2009, you may qualify for a credit of up to $7,500. Credits reduce your tax on a dollar-for-dollar basis, unlike deductions, which simply reduce your taxable income. However, this credit must be paid back over time. It's essentially a 15-year interest-free loan aimed at making home purchases more affordable.
The catches: It's not available for those who are simply trading up or buying a vacation or rental property. You can't have owned another home within three years of the qualifying purchase. It also phases out for single filers who earn more than $95,000 and married couples filing jointly who earn more than $170,000.
IMPROVED EARNED INCOME CREDIT. More people can qualify for the generous earned income tax credit, and the amount of the credit has risen. The credit, aimed at aiding the working poor, now can be claimed by families with two or more children who earn up to $41,646. The maximum credit amount: $4,824.
HIGHER MILEAGE DEDUCTIONS. Those who drive for work can deduct up to 58.5 cents per mile for miles driven after June 30. Before June 30, the mileage rate was 50.5 cents.
INFLATION ADJUSTMENTS. Standard deductions, personal exemption credits and marginal tax brackets have all been adjusted for inflation, so those earning the same amount as they did in 2007 will pay less tax. In addition, there's a new standard deduction of up to $500 for singles and $1,000 for married couples for those who pay real estate taxes.
AID FOR MIDWEST DISASTER VICTIMS. A wide variety of tax relief programs were put in place to help people who suffered catastrophic losses from last summer's floods and storms.
The relief includes liberalized casualty loss rules, additional exemptions and deductions for people who came to the aid of disaster victims, and special rules for those claiming the earned income tax credit and for those who needed to tap retirement savings. For details, go to www.irs.gov and search for Publication 4492-B.
GREATER ACCESS TO FREE FILING. The federal government's free electronic filing will be available to anyone who wants to use it this year through an online tax form program. The software that helps interview you as a way of preparing your tax return is available only to those earning up to $56,000. For everyone, the agency is posting electronic forms that can be prepared much like hand-prepared forms.