Your income tax: Deductions are added for this year

Underpay your taxes, and you could receive a sternly worded letter from the IRS, with ominous references to "interest," "penalties" and possibly, "incarceration."

But if you overpay, it's unlikely that the IRS will send you a check or even a thank-you note. It's your responsibility to claim all the credits and deductions available to you. Here's a look at some new tax breaks that could cut your 2009 tax bill:

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Home buyer tax credit

Eligibility extended to those who already owned a house

This tax credit was originally intended for first-time home buyers, but that's no longer the case. Under legislation signed in November, two types of home buyers qualify for a tax credit on their 2009 returns:

•Home buyers who haven't owned a primary residence for three years prior to the purchase are eligible for a tax credit of up to $8,000. This credit is available for home buyers who purchased a home from Jan. 1, 2009, to April 30, 2010.

•Home buyers who have owned their primary residence for five consecutive years out of the last eight are eligible for a credit of up to $6,500. This credit is limited to homes purchased after Nov. 6 and on or before April 30, 2010.

For purchases after Nov. 6, the price of homes eligible for the first-time and existing home buyer credit is capped at $800,000.

There are income limits on the credit, but the threshold will depend on when you bought the home. For first-time home buyers who bought a home before Nov. 7, the cutoff for claiming the full credit is modified adjusted gross income (MAGI) of $75,000, or $150,000 for joint filers. Those with MAGI from $75,000 to $95,000, or $150,000 to $170,000 for joint filers, are eligible for a reduced credit; those with higher incomes don't qualify.

For purchases made after Nov. 6, the full credit is available for first-time and repeat buyers with MAGI of up to $125,000, or $225,000 for joint filers. Those with MAGI from $125,000 to $145,000, or $225,000 to $245,000 for joint filers, are eligible for a reduced credit; and those with higher incomes are ineligible.

Taxpayers who buy a home from Jan. 1 to April 30, 2010, have the option of claiming the credit on their 2009 tax return, says Bob Meighan, vice president of TurboTax. "That's a good tax-planning benefit," he says. "You can get your refund much quicker."

But probably not as quickly as you'd like, Meighan says. In an effort to deter fraud, the IRS is requiring taxpayers who claim the credit to attach a copy of their settlement document to their tax returns. That means those taxpayers won't be able to file electronically. When you file by mail, you typically have to wait up to six weeks to get your refund, vs. as little as 10 days for e-filed returns.

To claim the home buyer tax credit, you'll need to fill out Form 5405, available at www.irs.gov.

Earned income tax credit

Eligibility requirements are expanded, so you may qualify

This tax credit is designed to help low-income, working families. Many households saw their income drop last year because of the economic downturn, so even if you weren't eligible in the past, you might qualify in 2009, says David Williams, IRS director of electronic tax administration and refundable credits.

Another reason to give the EITC a second look: Eligibility requirements have been expanded. The IRS has created a new category for families with three or more eligible children and raised the income thresholds. For example, a married couple with two children could have 2009 earned income of up to $45,295 and qualify for the credit (see box).

About a quarter of taxpayers who are eligible for the EITC don't claim it. Many of those are childless taxpayers who don't realize they qualify, Williams says.

Another barrier is the complexity of the credit. Many low-income taxpayers can't afford to pay a tax preparer; others are vulnerable to unscrupulous preparers who try to sell them high-interest loans and other products. But there's help available. If you're comfortable doing your taxes online, you can use Free File, a partnership between the IRS and private software manufacturers that allows eligible taxpayers to prepare and e-file their federal returns at no cost. Taxpayers with 2009 adjusted gross income (AGI) of $57,000 or less are eligible to use Free File, available through www.irs.gov.

If you don't have access to a computer, you may be eligible for assistance from the IRS Volunteer Income Tax Assistance program. This program, staffed by trained community volunteers, is designed to help low- and moderate-income households prepare their tax returns. To find a VITA location in your neighborhood, call 800-906-9887.

New car sales tax deduction

Buyers eligible even if they did a 'cash-for-clunkers' deal

Taxpayers who purchased a new car, motorcycle, light truck or mobile home on or after Feb. 17, 2009, and before Jan. 1, 2010, can deduct sales taxes for the first $49,500 of the purchase price. You don't need to itemize to claim this deduction. Single filers with AGI of up to $125,000 can claim the full deduction; those with AGI of up to $135,000 can claim a reduced amount. For married couples, the deduction phases out between $250,000 and $260,000.

You can claim the sales-tax deduction even if you participated in the federal "cash-for-clunkers" program, says Amy McAnarney, executive director of H&R Block's Tax Institute. That program provided vouchers of up to $4,500 to consumers who traded in their old vehicles for more fuel-efficient models. "Hopefully, you got a great deal on a new vehicle then, and now can claim the sales tax on your tax return," she says.

American Opportunity Credit

A boost in help for families faced with college costs

Congress is always looking for ways to help families offset the cost of college. This year, though, millions of families will be eligible for a new tax credit that's more generous and flexible than previous versions.

The American Opportunity Credit, part of last year's economic stimulus package, allows taxpayers to claim a credit of up to $2,500 for each eligible college student. The credit is calculated as 100% of expenses up to $2,000, and 25% of expenses above $2,000, up to the maximum.

Single filers with an AGI of up to $80,000 and married couples with AGI of up to $160,000 can claim the full amount. You can claim this credit even if you don't itemize, says McAnarney.

In addition, 40% of the credit is refundable, McAnarney says, which means you'll get a refund even if the credit exceeds the amount of tax you owe. That makes the credit particularly valuable for low-income parents and independent students who may not owe much in federal taxes, she says.

In calculating expenses that count toward the credit, parents and independent students can also include the cost of textbooks and other course materials.

Most educational institutions will provide students with Form 1098-T, which shows how much they spent on tuition last year, Meighan says. But since other costs are eligible for the credit, you should keep track of the amount you spent on room and board, supplies and other college-related costs, he says.

Contributions to Haiti relief

Make a donation now, take a deduction now

If you're a regular giver, you're probably accustomed to deducting the previous year's charitable contributions on your tax return. But taxpayers who donate to Haiti relief organizations don't have to wait until next year to get a tax break for their generosity.

A special tax provision signed into law last month allows taxpayers who donated to Haiti relief organizations from Jan. 11 to March 1, 2010, to deduct the contributions on their 2009 tax return. Congress adopted the law to encourage Americans to help victims of the Jan. 12 earthquake.

The provision includes contributions made via text message, an increasingly popular way to give to charity, Meighan says.

The IRS says your phone bill will meet its record-keeping requirements. You must itemize to deduct contributions to charity.

The provision only applies to cash contributions, and money must go to charities that are providing earthquake relief in Haiti. You can find more information about charities that are helping in Haiti at the website for the U.S. Agency for International Development, www.usaid.gov.