SECTION 2. CHANGES

.01 For taxable years beginning after 2008, the $3,000 increase to the phaseout amounts of the earned income tax credit for married taxpayers filing a joint return under § 32(b)(2)(B)(iii) are adjusted for inflation. The adjusted amounts are included in the amounts shown in section 3.06(1) of this revenue procedure.

.02 Section 42(h)(3)(I) was added to the Code by section 3001, Division C,

Title I, of the Housing and Economic Recovery Act of 2008, Pub. L. No. 110–289, 122 Stat. 2654 (2008), to provide for a temporary increase in the State housing credit ceiling under § 42(h)(3)(C)(ii)(I) and (II) after any adjustments for inflation under § 42(h)(3)(H). Accordingly, for calendar years 2008 and 2009, the inflation adjusted amount under § 42(h)(3)(C)(ii)(I) is increased by $0.20, and the inflation adjusted amount under § 42(h)(3)(C)(ii)(II) is increased by ten (10) percent and rounded to the next lowest multiple of $5,000. (See section 3.07 of this revenue procedure.)

2008–45 I.R.B. 1108 November 10, 2008

.06 The dollar limit on contributions to funeral trusts under § 685(c) was repealed by § 9 of the Hubbard Act, Pub. L. No. 110–317, 122 Stat. 3526 (2008), for taxable years beginning after August 29, 2008. Accordingly, the dollar limitation under § 685(c) is no longer included in this revenue procedure.

SECTION 3. 2009 ADJUSTED ITEMS

.01 Tax Rate Tables . For taxable years beginning in 2009, the tax rate tables under § 1 are as follows:

cial rules for the treatment of property of certain individuals who are “covered expatriates,” and who cease to be treated as long term residents or who relinquish their U.S. citizenship (expatriate). Pursuant to § 877A(a)(1), covered expatriates, as defined in § 877A(g)(1), are subject to income tax on the net unrealized gain in their property as if the property had been sold for its fair market value on the day before the expatriation date, as defined in § 877A(g)(3). Section 877A(a)(3) provides that the amount of gain includible in gross income under § 877A(a)(1) is reduced (but not below zero) by $600,000. For taxable years beginning in a calendar year after 2008, the $600,000 amount is

adjusted for inflation. (See sections 3.26 and 3.27 of this revenue procedure.)

.05 The passenger air transportation excise taxes imposed under § 4261(b) and (c), as extended by § 2(b)(1) of the Federal Aviation Administration Extension Act of 2008, Part II, Pub. L. No. 110–330, 122 Stat. 3717 (2008), apply to transportation taken through March 31, 2009, and to amounts paid on or before March 31, 2009, for transportation beginning after that date. Accordingly, the amounts in § 4261(b) and (c) are adjusted for inflation for 2009 and are included in this revenue procedure. (See section 3.32 of this revenue procedure.)

TABLE 1 - Section 1(a) - Married Individuals Filing Joint Returns and Surviving Spouses.

If Taxable Income Is : The Tax Is :

Not over $16,700 10% of the taxable income

Over $16,700 but not over $67,900

Over $67,900 but not over $137,050

Over $137,050 but not over $208,850

Over $208,850 but not over $372,950

$1,670 plus 15% of the excess over $16,700

$9,350 plus 25% of the excess over $67,900

$26,637.50 plus 28% of the excess over $137,050

$46,741.50 plus 33% of the excess over $208,850

Over $372,950 $100,894.50 plus 35% of the excess over $372,950

TABLE 2 - Section 1(b) - Heads of Households.

If Taxable Income Is : The Tax Is :

Not over $11,950 10% of the taxable income

Over $11,950 but not over $45,500

Over $45,500 but not over $117,450

Over $117,450 but not over $190,200

Over $190,200 but not over $372,950

$1,195 plus 15% of the excess over $11,950

$6,227.50 plus 25% of the excess over $45,500

$24,215 plus 28% of the excess over $117,450

$44,585 plus 33% of the excess over $190,200

Over $372,950 $104,892.50 plus 35% of the excess over $372,950

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TABLE 3 — Section 1(c) — Unmarried Individuals (other than Surviving Spouses and Heads of Households).

If Taxable Income Is : The Tax Is :

Not over $8,350 10% of the taxable income

Over $8,350 but not over $33,950

Over $33,950 but not over $82,250

Over $82,250 but not over $171,550

Over $171,550 but not over $372,950

$835 plus 15% of the excess over $8,350

$4,675 plus 25% of the excess over $33,950

$16,750 plus 28% of the excess over $82,250

$41,754 plus 33% of the excess over $171,550

Over $372,950 $108,216 plus 35% of the excess over $372,950

TABLE 4 - Section 1(d) - Married Individuals Filing Separate Returns.

If Taxable Income Is : The Tax Is :

Not over $8,350 10% of the taxable income

Over $8,350 but not over $33,950

Over $33,950 but not over $68,525

Over $68,525 but not over $104,425

Over $104,425 but not over $186,475

$835 plus 15% of the excess over $8,350

$4,675 plus 25% of the excess over $33,950

$13,318.75 plus 28% of the excess over $68,525

$23,370.75 plus 33% of the excess over $104,425

Over $186,475 $50,447.25 plus 35% of the excess over $186,475

TABLE 5 - Section 1(e) - Estates and Trusts.

If Taxable Income Is : The Tax Is :

Not over $2,300 15% of the taxable income

Over $2,300 but not over $5,350

Over $5,350 but not over $8,200

Over $8,200 but not over $11,150

$345 plus 25% of the excess over $2,300

$1,107.50 plus 28% of the excess over $5,350

$1,905.50 plus 33% of the excess over $8,200

Over $11,150 $2,879 plus 35% of the excess over $11,150

enue procedure. The same $950 amount is used for purposes of § 1(g)(7) (that is, to determine whether a parent may elect to include a child’s gross income in the parent’s gross income and to calculate the

.02 Unearned Income of Minor Children Taxed as if Parent’s Income (the “Kiddie Tax”) . For taxable years beginning in 2009, the amount in § 1(g)(4)(A)(ii)(I), which is used to reduce

the net unearned income reported on the child’s return that is subject to the “kiddie tax,” is $950. This amount is the same as the $950 standard deduction amount provided in section 3.10(2) of this rev

2008–45 I.R.B. 1110 November 10, 2008

time Learning Credits otherwise allowable under § 25A(a).

.06 Earned Income Credit . (1) In general . For taxable years beginning in 2009, the following amounts are used to determine the earned income credit under § 32(b). The “earned income amount” is the amount of earned income at or above which the maximum amount of the earned income credit is allowed. The “threshold phaseout amount” is the amount of adjusted gross income (or, if greater, earned income) above which the maximum amount of the credit begins to phase out. The “completed phaseout amount” is the amount of adjusted gross income (or, if greater, earned income) at or above which no credit is allowed. The threshold phaseout amounts and the completed phaseout amounts shown in the table below for married taxpayers filing a joint return include the increase provided in § 32(b)(2)(B)(iii), as adjusted for inflation for taxable years beginning in 2009.

“kiddie tax”). For example, one of the requirements for the parental election is that a child’s gross income is more than the amount referenced in § 1(g)(4)(A)(ii)(I) but less than 10 times that amount; thus, a child’s gross income for 2009 must be more than $950 but less than $9,500.

.03 Adoption Credit . For taxable years beginning in 2009, under § 23(a)(3) the credit allowed for an adoption of a child with special needs is $12,150. For taxable years beginning in 2009, under § 23(b)(1) the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $12,150. The available adoption credit begins to phase out under § 23(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $182,180 and is completely phased out for taxpayers with modified adjusted gross income of $222,180 or more. (See section 3.14 of this revenue procedure for the adjusted items relating to adoption assistance programs.)

.04 Child Tax Credit . For taxable years beginning in 2009, the value used in § 24(d)(1)(B)(i) to determine the amount of credit under § 24 that may be refundable is $12,550.

.05 Hope and Lifetime Learning Cred- its .

(1) For taxable years beginning in 2009, the Hope Scholarship Credit under § 25A(b)(1) is an amount equal to 100 percent of qualified tuition and related expenses not in excess of $1,200 plus 50 percent of those expenses in excess of $1,200, but not in excess of $2,400. Accordingly, the maximum Hope Scholarship Credit allowable under § 25A(b)(1) for taxable years beginning in 2009 is $1,800.

(2) For taxable years beginning in 2009, a taxpayer’s modified adjusted gross income in excess of $50,000 ($100,000 for a joint return) is used to determine the reduction under § 25A(d)(2)(A)(ii) in the amount of the Hope Scholarship and Life

Number of Qualifying Children

Item One Two or More None

Earned Income Amount $ 8,950 $12,570 $ 5,970

Maximum Amount of Credit $ 3,043 $ 5,028 $ 457

Threshold Phaseout Amount

(Single, Surviving Spouse, or Head of Household)

Completed Phaseout Amount

(Single, Surviving Spouse, or Head of Household)

Threshold Phaseout Amount

(Married Filing Jointly)

Completed Phaseout Amount

(Married Filing Jointly)

The instructions for the Form 1040 series provide tables showing the amount of the earned income credit for each type of taxpayer.

(2) Excessive investment income . For taxable years beginning in 2009, the earned income tax credit is not allowed under § 32(i) if the aggregate amount of certain investment income exceeds $3,100.

.07 Low-Income Housing Credit . For calendar year 2009, the amount used under § 42(h)(3)(C)(ii) to calculate the State housing credit ceiling for the low-income

$16,420 $16,420 $ 7,470

$35,463 $40,295 $13,440

$19,540 $19,540 $10,590

$38,583 $43,415 $16,560

housing credit is the greater of (1) $2.30 multiplied by the State population, or (2) $2,665,000.

.08 Alternative Minimum Tax Exemp- tion for a Child Subject to the “Kiddie Tax.” For taxable years beginning in 2009, for a child to whom the § 1(g) “kiddie tax” applies, the exemption amount under §§ 55 and 59(j) for purposes of the alternative minimum tax under § 55 may not exceed the sum of (1) the child’s earned income for the taxable year, plus (2) $6,700.

.09 Transportation Mainline Pipeline Construction Industry Optional Expense

Substantiation Rules for Payments to Em- ployees under Accountable Plans . For calendar year 2009, an eligible employer may pay certain welders and heavy equipment mechanics an amount of up to $16 per hour for rig-related expenses that is deemed substantiated under an accountable plan if paid in accordance with Rev. Proc. 2002–41, 2002–1 C.B. 1098. If the employer provides fuel or otherwise reimburses fuel expenses, up to $10 per hour is deemed substantiated if paid under Rev. Proc. 2002–41.

.10 Standard Deduction .

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(1) In general . For taxable years beginning in 2009, the standard deduction amounts under § 63(c)(2) are as follows:

Filing Status Standard Deduction

Married Individuals Filing Joint Returns and Surviving Spouses (§ 1(a)) $11,400

Heads of Households (§ 1(b)) $ 8,350

Unmarried Individuals (other than Surviving Spouses and Heads of Households) (§ 1(c)) $ 5,700

Married Individuals Filing Separate Returns (§ 1(d)) $ 5,700

.17 General Arbitrage Rebate Rules . For bond years ending in 2009, the amount of the computation credit determined under § 1.148–3(d)(4) of the proposed Income Tax Regulations is $1,490.

.18 Safe Harbor Rules for Broker Commissions on Guaranteed Invest- ment Contracts or Investments Purchased for a Yield Restricted Defeasance Es- crow . For calendar year 2009, under § 1.148–5(e)(2)(iii)(B)( 1 ), a broker’s commission or similar fee for the acquisition of a guaranteed investment contract or investments purchased for a yield restricted defeasance escrow is reasonable if (1) the amount of the fee that the issuer treats as a qualified administrative cost does not exceed the lesser of (A) $35,000, and (B) 0.2 percent of the computational base (as defined in § 1.148–5(e)(2)(iii)(B)( 2 )) or, if more, $4,000; and (2) the issuer does not treat more than $99,000 in brokers’ commissions or similar fees as qualified administrative costs for all guaranteed investment contracts and investments for yield restricted defeasance escrows purchased with gross proceeds of the issue.

.19 Personal Exemption . (1) Exemption amount . For taxable years beginning in 2009, the personal exemption amount under § 151(d) is $3,650. The exemption amount for taxpayers with adjusted gross income in excess of the maximum phaseout amount is $2,433 for taxable years beginning in 2009.

(2) Phaseout . For taxable years beginning in 2009, the personal exemption amount begins to phase out at, and reaches the maximum phaseout amount after, the following adjusted gross income amounts:

(2) Dependent . For taxable years beginning in 2009, the standard deduction amount under § 63(c)(5) for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of (1) $950, or (2) the sum of $300 and the individual’s earned income.

(3) Aged or blind . For taxable years beginning in 2009, the additional standard deduction amount under § 63(f) for the aged or the blind is $1,100. These amounts are increased to $1,400 if the individual is also unmarried and not a surviving spouse.

.11 Overall Limitation on Itemized De- ductions . For taxable years beginning in 2009, the “applicable amount” of adjusted gross income under § 68(b), above which the amount of otherwise allowable itemized deductions is reduced under § 68, is $166,800 (or $83,400 for a separate return filed by a married individual).

.12 Qualified Transportation Fringe . For taxable years beginning in 2009, the monthly limitation under § 132(f)(2)(A), regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass, is $120. The monthly limitation under § 132(f)(2)(B), regarding the fringe benefit exclusion amount for qualified parking, is $230.

.13 Income from United States Savings Bonds for Taxpayers Who Pay Qualified Higher Education Expenses . For taxable years beginning in 2009, the exclusion under § 135, regarding income from United States savings bonds for taxpayers who pay qualified higher education expenses, begins to phase out for modified adjusted gross income above $104,900 for joint

returns and $69,950 for other returns. The exclusion is completely phased out for modified adjusted gross income of $134,900 or more for joint returns and $84,950 or more for other returns.

.14 Adoption Assistance Programs . For taxable years beginning in 2009, under § 137(a)(2) the amount that can be excluded from an employee’s gross income for the adoption of a child with special needs is $12,150. For taxable years beginning in 2009, under § 137(b)(1) the maximum amount that can be excluded from an employee’s gross income for the amounts paid or expenses incurred by an employer for qualified adoption expenses furnished pursuant to an adoption assistance program for other adoptions by the employee is $12,150. The amount excludable from an employee’s gross income begins to phase out under § 137(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $182,180 and is completely phased out for taxpayers with modified adjusted gross income of $222,180 or more. (See section 3.03 of this revenue procedure for the adjusted items relating to the adoption credit.)

.15 Private Activity Bonds Volume Cap . For calendar year 2009, the amounts used under § 146(d)(1) to calculate the State ceiling for the volume cap for private activity bonds is the greater of (1) $90 multiplied by the State population, or (2) $273,270,000.

.16 Loan Limits for Agricultural Bonds . For calendar year 2009, the loan limit amount on agricultural bonds under § 147(c)(2)(A) for first-time farmers is $469,200.

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Filing Status AGI – Beginning of Phaseout

AGI – Maximum Phaseout

Married Individuals Filing Joint Returns and Surviving Spouses (§ 1(a)) $250,200 $372,700

Heads of Households (§ 1(b)) $208,500 $331,000

Unmarried Individuals (other than Surviving Spouses and Heads of Households) (§ 1(c)) $166,800 $289,300

Married Individuals Filing Separate Returns (§ 1(d)) $125,100 $186,350

the limitations under § 213(d)(10), regarding eligible long-term care premiums includible in the term “medical care,” are as follows:

.20 Election to Expense Certain Depre- ciable Assets . For taxable years beginning in 2009, under § 179(b)(1) the aggregate cost of any § 179 property a taxpayer may elect to treat as an expense cannot exceed $133,000. Under § 179(b)(2) the $133,000

limitation is reduced (but not below zero) by the amount by which the cost of § 179 property placed in service during the 2009 taxable year exceeds $530,000.

.21 Eligible Long-Term Care Premi- ums . For taxable years beginning in 2009,

Attained Age Before the Close of the Taxable Year Limitation on Premiums

40 or less $ 320

More than 40 but not more than 50 $ 600

More than 50 but not more than 60 $1,190

More than 60 but not more than 70 $3,180

More than 70 $3,980

“average annual net income tax” of more than $145,000 for the five taxable years ending before the date of the loss of United States citizenship under § 877(a)(2)(A) is a covered expatriate for purposes of § 877A(g)(1).

.27 Tax Responsibilities of Expatria- tion . For taxable years beginning in 2009, the amount that would be includible in the gross income of a covered expatriate by reason of § 877A(a)(1) is reduced (but not below zero) by $626,000.

.28 Foreign Earned Income Exclusion . For taxable years beginning in 2009, the foreign earned income exclusion amount under § 911(b)(2)(D)(i) is $91,400.

.29 Valuation of Qualified Real Prop- erty in Decedent’s Gross Estate . For an estate of a decedent dying in calendar year 2009, if the executor elects to use the special use valuation method under § 2032A for qualified real property, the aggregate decrease in the value of qualified real property resulting from electing to use § 2032A for purposes of the estate tax cannot exceed $1,000,000.

.30 Annual Exclusion for Gifts . (1) For calendar year 2009, the first $13,000 of gifts to any person (other than gifts of future interests in property) are

22 Medical Savings Accounts . (1) Self-only coverage . For taxable years beginning in 2009, the term “high deductible health plan” as defined in § 220(c)(2)(A) means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,000 and not more than $3,000, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,000.

(2) Family coverage . For taxable years beginning in 2009, the term “high deductible health plan” means, for family coverage, a health plan that has an annual deductible that is not less than $4,000 and not more than $6,050, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $7,350.

.23 Interest on Education Loans . For taxable years beginning in 2009, the $2,500 maximum deduction for interest paid on qualified education loans under § 221 begins to phase out under § 221(b)(2)(B) for taxpayers with modified adjusted gross income in excess of $60,000 ($120,000 for joint returns), and is completely phased out for taxpayers with modified adjusted gross income of

$75,000 or more ($150,000 or more for joint returns).

.24 Treatment of Dues Paid to Agricul- tural or Horticultural Organizations . For taxable years beginning in 2009, the limitation under § 512(d)(1), regarding the exemption of annual dues required to be paid by a member to an agricultural or horticultural organization, is $145.

.25 Insubstantial Benefit Limitations for Contributions Associated with Chari- table Fund-Raising Campaigns .

(1) Low cost article . For taxable years beginning in 2009, the unrelated business income of certain exempt organizations under § 513(h)(2) does not include a “low cost article” of $9.50 or less.

(2) Other insubstantial benefits . For taxable years beginning in 2009, the $5, $25, and $50 guidelines in section 3 of Rev. Proc. 90–12, 1990–1 C.B. 471 (as amplified by Rev. Proc. 92–49, 1992–1 C.B. 987, and modified by Rev. Proc. 92–102, 1992–2 C.B. 579), for disregarding the value of insubstantial benefits received by a donor in return for a fully deductible charitable contribution under § 170, are $9.50, $47.50, and $95, respectively.

.26 Expatriation to Avoid Tax . For calendar year 2009, an individual with

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by reason of the death of a chronically ill individual, is $280.