void setup()
{
    DDRB |= 0x01;  //pin D8 is output for LED
    TCCR1A = 0x00; //normal timer1 operation
    TCCR1B = 0x00; // "
    TCCR1B |= (1 << CS12); //prescalar set to 256, 256/16E6 = 16 us per timer count
}

void loop()
{
  TCNT1 = 0;
  while(PINB & 0x02) //while pin D9 is high
  {
    if(TCNT1 >= 31250) //16us * 31250 = 500 ms elapsed
    {
      if(PINB & 0x01)  //toggle LED
      {
        PORTB &= ~0x01;  //led off
      }else
       {
        PORTB |= 0x01;  //led on
       }
     TCNT1 = 0;  //reset timer to 0
    }
  }
  PORTB &= ~0x01;  //led off
}