Here are some of the more important California State Individual Income Tax law changes for the tax year 2009 as follows;

1.Individual Income Tax Rates Increased by .25%
According to the California Franchise Tax Board, “for tax years beginning on or after January 1, 2009 the individual tax rates are increased by 0.25%. The rate increase applies to resident and non-resident individuals, to taxable estates and trusts, and to regular and alternative minimum tax rates. The rate increase is reduced to 0.125% if Cali¬fornia is expected to receive at least $10 billion from the federal government.

To qualify, the fed-eral funds must be made available to California by June 30, 2010. State Treasurer Bill Lockyer and Director of Fi-nance Michael Genest must determine by April 1, 2009 if the threshold will be reached for the rate reduction to become effective. The rate increase, whether ultimately 0.25% or 0.125%, is effective through December 31, 2010. The increase will be extended through December 31, 2012 if voters approve a Constitutional amend¬ment related to budget matters.”

2.Dependent Credit Reduced by $210 or More Per Dependent
According to the California Franchise Tax Board , “for tax years beginning on or after January 1, 2009, the dependent credit is reduced to an amount equal to the individual personal exemption credit. Actual 2009 credit amounts are not yet determined as the amounts are adjusted annually for inflation. The 2008 amounts in effect are $309 for depen¬dent credit and $99 for the personal credit.

Based on these 2008 amounts, the 2009 dependent credit would be reduced by $210 per dependent. The dependent credit reduction is effective through December 31, 2010 and extended through December 31, 2012 if voters approve a Constitutional amendment related to budget matters.”

3.New Home Purchase Tax Credit
Furthermore, “Individuals who purchase a new, never previous¬ly occupied, single-family residence on or after March 1, 2009 and before March 1, 2010, will be eligible for a credit equal to the lesser of 5% of the purchase price or $10,000 against their California personal income tax. The credit must be claimed in equal amounts over three successive tax years, beginning with the tax year in which the purchase is made.”

But these “credits must be pre-approved before a taxpayer claims it on their tax return. The Legislature has limited available credits for all taxpayers to $100 million. As such, new home purchase credits will be approved on a first-come, first-served basis. To apply for the credit, an application must be filed by the escrow company within seven calendar days after closing.”

4.Small Business Hiring Tax Credit
Finally, "for taxable years beginning on or after January 1, 2009, a credit against individual and corporate in-come/franchise tax is granted in an amount equal to $3,000, prorated as provided, for each qualified full-time employee hired during the taxable year by a qualified employer. A qualified employer must have 20 or less employees on the last day of the preceding tax year, and may only claim a credit on the net increase in “qualified employees” for the current year in comparison to last year.

New businesses reflect all qualified employees as net increases. Credits will cease to be granted in the calendar quarter when the total credits claimed on all state returns for all eligible years under this statute cumulatively total $400 million."

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