2010

Important Tax Changes for 2010

This summarizes the important changes that take effect in 2010 that could affect your estimated tax payments for 2010.More information on these and other changes check back as we get closer to the tax season.

 

Earned income credit (EIC). You may be able to take the EIC if:

  • Three or more children lived with you and you earned less than $43,352 ($48,362 if married filing jointly),
  • Two children lived with you and you earned less than $40,363 ($45,373 if married filing jointly),
  • One child lived with you and you earned less than $35,535 ($40,545 if married filing jointly), or
  • A child did not live with you and you earned less than $13,460 ($18,470 if married filing jointly).

The maximum AGI you can have and still get the credit also has increased. You may be able to take the credit if your AGI is less than the amount in the above list that applies to you. The maximum investment income you can have and still get the credit is still $3,100.

 

Important Tax Changes for 2010

Decrease in personal casualty and theft loss limit. Each personal casualty or theft loss is limited to the excess of the loss over $100 (instead of $500). This is in addition to the 10% of AGI limit that generally applies to the net loss.

Disaster losses. The special rules that were in effect in 2008 and 2009 for losses of personal use property attributable to federally declared disasters do not apply to losses occurring in 2010 and later years.

Alternative minimum tax (AMT) exemption amount decreased. The AMT exemption amount is scheduled to decrease to $33,750 ($45,000 if married filing jointly or a qualifying widow(er); $22,500 if married filing separately).

Recapture of first-time homebuyer credit. If you claimed the first-time homebuyer credit for a home you bought in 2008, you must begin repaying the credit in 2010.

IRA deduction expanded. You may be able to take an IRA deduction if you were covered by a retirement plan and your 2010 modified AGI is less than $66,000 ($109,000 if married filing jointly or qualifying widow(er)). If your spouse was covered by a retirement plan, but you were not, you may be able to take an IRA deduction if your 2010 modified AGI is less than $177,000.

Roth IRA income limit. You may be able to make a Roth IRA contribution if your modified AGI is less than $120,000 ($177,000 if you are married filing jointly).

Conversions to Roth IRAs. Beginning in 2010, the modified AGI and filing status requirements for conversions to Roth IRAs are eliminated.Also, for any conversions in 2010, any amounts that would be included as income will be included in income in equal amounts in 2011 and 2012. You can choose to include the entire amount in income in 2010.

 

Expiring tax benefits. The following benefits are scheduled to expire and will not be available for 2010.

  • Deduction for educator expenses in figuring AGI.
  • Tuition and fees deduction in figuring AGI.
  • Increased standard deduction for real estate taxes or net disaster loss.
  • Itemized deduction or increased standard deduction for state or local sales or excise taxes on the purchase of a new motor vehicle.
  • Deduction for state and local sales taxes.
  • The exclusion from income of up to $2,400 in unemployment compensation.
  • The exclusion from income of qualified charitable distributions made from IRA accounts.
  • Government retiree credit.
  • District of Columbia first-time homebuyer credit (for homes purchased after 2009).
  • Extra $3,000 IRA deduction for employees of bankrupt companies.
  • Certain tax benefits for Midwestern disaster areas, including the additional exemption amount if you provided housing for a person displaced by the Midwestern storms, tornadoes, or flooding.

 

Personal exemption and itemized deduction phaseouts ended

Personal exemption and itemized deduction phaseouts ended. For 2010, taxpayers with AGI above a certain amount will no longer lose part of their deduction for personal exemptions and itemized deductions.

One thought on “Important Tax Changes for 2010

  1. This is an excellent summary of the IRA contribution. My wife is self employed and has a special kind of 401k called a “Individual 401K” that allows her save up to $49,000 a year on a pre-tax basis!

Leave a Reply

Your email address will not be published. Required fields are marked *