2010 Tax Changes

It’s that time of the year again.  Many of you have already received or will be receiving your year-end tax statements.  The following are some changes in the tax rules for 2010:

 Due Date 

This year, the due date for Form 1040 is Monday, April 18th.  The reason is that April 15th is Emancipation Day and considered a District of Columbia Holiday.  Therefore, the tax filing deadline for the whole nation is deferred.

 No More Phase-Outs for Itemized Deductions and Exemptions

 Phase outs for popular itemized deductions have been eliminated for 2010, 2011 and 2012.  Itemized deductions that are not subject to phase outs include mortgage interest, state and local income and property taxes, charitable deductions, and personal and dependent exemption deductions.

 One-Time Break for Self-Employed Individuals

For 2010 only, self-employed people can deduct health insurance premiums paid when calculating their self-employment tax bills on Schedule SE.  Self-employed people can generally deduct their health insurance premiums from their federal taxable income.  In 2010, self-employed people can now deduct their health insurance premiums from both federal taxable income and when calculating their self-employment tax bill.

Adoption Credit

 The maximum adoption credit was increased to $13,170 in 2010 from $12,150 in 2009.  Also, the credit is 100% refundable for 2010.  This means that you will received a check for any leftover adoption credit, if and when, your federal income tax bill has been reduced to zero.  Use form 8839 to claim your adoption credit.

 Deductions for Sales Taxes on New Vehicle Purchases Are Gone

 The 2009 Stimulus Act allowed individuals who did not itemize a temporary write-off for state and local sales taxes paid on new vehicles purchased between 2/17/09 and 12/31/09. The write-off was in the form of an additional standard deduction allowance.  For individuals who itemized their deductions, they were allowed to claim an extra itemized deduction. This deduction expired in 2009 and was not reinstated for 2010.

 Real Estate Tax Deduction for Non-Itemizers is Gone

 In 2008 and 2009, tax payers who did not itemize could write off up to $500 for single filers and $1,000 for married jointly filing couples of state and local real property taxes by claiming an increased standard deduction.  This deduction expired in 2009 and was not reinstated for 2010.

Break for Unemployment Benefits Is Gone

100% of unemployment benefits received in 2010 generally must be reported as income.  In 2009, the first $2,400 of unemployment benefits was federal income tax free.

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