What’s New for Your 2010 Income Tax
by Milton Gugenheim
Congress passed the Bush Tax Package (2010 Tax Relief Act) in December 2010. The following is a summary of what is new/changes for Tax Year 2010.
- The individual income tax rates will be same as the 2009 rates.
- The capital gains/dividends rates will be same as the 2009 rates.
- The marriage penalty relief will remain (twice the singular rate)
- The alternative minimum tax will remain the same as the 2009 rates.
- Makework credit - up to $400 or $800 for Married Filing Joint (MFJ) on earned income. If the person is on Social Security or a government pension, the maximum is $150. Schedule M. This is for the 400,000 that did not receive the credit in 2009 filing.
- The 2010 return has to be filed by April 18, 2011 (Monday). Returns with Schedule A (itemized items) attached will be filed beginning February 8, 2011.
- Education credit –American Opportunity Education Credit. The coverage is now for four years and up to $2500 credit.
- Standard Deduction - Any sales tax for a car purchased after February 16, 2009 and before January 1, 2010 and paid for in 2010, tax is put on Schedule I for persons who do not use Schedule A.
- Qualified child definition - See Publication 17, chapters 3, 21, 34 and 36, or Form 1040 Instructions (Inst 1040) New requirements
- Earned income credit (EIC) - The change includes a third child in some cases. Details on maximum income levels, etc. See Publication 17, chapter 35 or Inst 1040.
- Divorced or Separated Parents - new rules for claiming a non-custodial child. See Publication 17, Chapter 3.
- Child invested income - Not subjected to parent’s tax rate with invested income under $1900.
- Personal casualty or theft loss - limit is over $100. This is in addition to 10% of Adjusted Gross Income (AGI) limit that generally applies to the net loss.
- First home or replacement homebuyer credit - If home is bought before April 30, 2010 in some cases, you maybe able to claim credit. See Publication 17 chapter 37 for requirements.
- Standard mileage rate for 2010 is 50 cents per mile. Medical travel is 16.5 cents and charity travel is 14.0 cents. For 2011, the standard mileage is 51 cents.
- Electric vehicle credit – See Publication 17, chapter 37 for details.
- Credit for non-business energy saving item - Stoves, refrigerator, windows, heaters, A/C, etc. You will receive a manufacturers’ certificate when the qualified item is purchased. See Publication 17, chapter 37
- Retirement saving accounts (IRA and Roth) - Traditional IRA – modified adjusted gross income (AGI) has raised it to a maximum of $65,000 (single) or $109,000 MFJ.
Roth IRA –No limit Also, half of any income that results from a rollover or conversion to a Roth IRA from another retirement plan in 2010 is included in income in 2011, and the other half in 2012, unless you elect to include all of it in 2010. See Publication 17, chapters 10 and 17 and Publication 590.
- Retired savings contribution credit - The limit has been raised to $27,000 single ($41,625 MFJ)
- Standard deduction is $3650 for each exemption (income limit is $166,800 in addition, reduction is in effect)
- Maximum Social Security Tax for Self Employed - is now $106,800 (6.2%). Medicare is taxed on all income (1.45%).
- Estate of decedents - The Act gives options to the estate of decedents that die after December 31, 2009 and before January 1, 2011. Consult a CPA or tax attorney for the best option.
Note: Form 1040 Instructions contain much of this same information.
See Publication 17 for detail information on each type of income and deductions. It is free, very helpful, so use it.
1-800-629-1040 for information
1-800-629-3676 to order forms and publications
www.IRS.gov to obtain information and download forms and publications, etc. which are usually more current than commercial sources.
What’s New for 2010 Income Tax
- EIC - income credit limits have been raised
- Personal casualty or theft loss - reduced to $100 vs. $500.
- IRA deduction increased for a person in a qualified retirement plan.
- Roth IRA income limits – raised to $120,000, single ($177,000 MFJ)
- Conversion to Roth IRA – no income limit required in 2010. Will be included in equal amounts in 2011 and 2012 income, or full amount in 2010 income.
- Mileage is 50 cents per mile. Others, no change.
- Expiring tax benefits:
Deduction for education expense in figuring AGI.
Tuition and fees deduction to AGI.
State income tax or local sales tax.
Tax on a motor vehicle (Schedule L in 2009)
Unemployment compensation exclusion of $2,400
Note: Subject to changes by Congress.
Milton Gugenheim is a HAL-PC member and has been an AARP Tax Aide Instructor and Local Coordinator for over eighteen years. He may be contacted at firstname.lastname@example.org, but no tax advice.
NOTICE: This information is our best effort to provide you with current information.. If you have a particular or unique personal question, consult a qualified tax accountant or lawyer. Note: Even the IRS will not guarantee its own advice.