IRS Announces 2009 Amounts for Standard Deduction, Transportation Fringes, Earned Income Credit and Pension Plan COLAs.

The IRS has released inflation-adjusted tables for 2009 reflecting increases in the standard deduction and excludable transportation fringes, among other changes [Rev. Proc. 2008-66, 10-16-08].

Standard deduction. The standard deduction amounts for 2009 increase to $11,400 for married couples filing jointly or surviving spouses ($10,900 in 2008), $8,350 for heads of households ($8,000 in 2008), $5,700 for single taxpayers ($5,450 in 2008), and $5,700 for married taxpayers filing separately ($5,450 in 2008).

Transportation fringes. The amounts that may be excluded from gross income for employer-provided "qualified transportation fringe benefits" for 2009 are as follows: $120 per month for "transportation in a commuter highway vehicle and any transit pass" ($115 in 2008), and $230 per month for "qualified parking" ($220 in 2008).

Earned Income Credit. For 2009, the Earned Income Credit for employees with one qualifying (dependent) child is 34% of the first $8,950 of earned income, for a maximum of $3,043 ($2,917 in 2008). For employees with two or more qualifying children, the EIC is 40% of the first $12,570 of earned income, for a maximum of $5,028 ($4,824 in 2008), and for employees with no qualifying children, the EIC is 7.65% of $5,970, for a maximum of $457 ($438 in 2008). Married employees filing jointly who earn less than $38,583 in 2009 ($35,463 for single employees) and who have at least one qualifying child can receive advance payments of their EIC of up to $1,826 ($1,750 in 2008) spread out over their pay periods during the year.

Foreign earned income exclusion. For 2009, the maximum foreign earned income exclusion amount under IRC §911(b)(2)(D)(i) is $91,400 ($87,600 in 2008). The maximum foreign housing cost exclusion amount under IRC §911(c)(2) is $12,796 ($12,264 in 2008).

IRS Announces Pension Plan COLAs for Tax Year 2009

The IRS has announced the cost-of-living adjustments (COLAs) applicable to dollar limits on benefits and contributions under qualified retirement plans, as well as other items, for tax year 2009 [IR-2008-118, 10-16-08].

• The limitation on the exclusion for elective deferrals under §402(g)(1) (e.g., §401(k) and §403(b) plans) is increased from $15,500 to $16,500.

• The limit on annual additions to defined contribution plans under §415(c)(1)(A) is increased from $46,000 to $49,000.

• For limitation years ending after December 31, 2008, the limit on the annual benefit under a defined benefit plan contained in §415(b)(1)(A) is increased from $185,000 to $195,000.

• The annual compensation limit under §401(a)(17) and §404(l) is increased from $230,000 to $245,000.

• The compensation amount under §408(p)(2)(E) regarding elective deferrals to SIMPLE retirement accounts is increased from $10,500 to $11,500.

• The limitation under §457(e)(15) concerning elective deferrals to deferred compensation plans of state and local governments and tax-exempt organizations is increased from $15,500 to $16,500.

• The limitation under §416(i)(1)(A)(i) concerning the definition of "key employee" in a top-heavy plan is increased from $150,000 to $160,000.

• The limitation under §414(v)(2)(B)(i) for catch-up contributions to §§401(k), 403(b), and 457 plans for individuals age 50 or over is increased from $5,000 to $5,500; the limitation under §414(v)(2)(B)(ii) for catch-up contributions to an employer's SIMPLE plan for individuals age 50 or over remains unchanged at $2,500.

• The limitation used in the definition of "highly compensated employee" under §414(q)(1)(B) is increased from $105,000 to $110,000.

• The compensation amount under §408(k)(2)(C) regarding simplified employee pensions (SEPs) is increased from $500 to $550.

• The compensation amount under federal regulation §1.61-21(f)(5)(i), concerning the definition of "control employee" for fringe benefit purposes, is increased from $90,000 to $95,000. The compensation amount under §1.61-21(f)(5)(iii) is increased from $185,000 to $195,000.