The end of the year is now approaching and with the calendar’s change to 2010, we will also see a series of changes in federal tax laws. Certain tax deductions and benefits available to millions of Americans will no longer be available next year. Additionally, there are many changes to the rate structures, exemptions, phase outs etc. The following is a summary of some of the most important tax law changes to occur in 2010:
New vehicle sales tax - Effective January 1, 2010, individuals will no longer be able to take the itemized deduction or increase in standard deduction for sales tax on the purchase of a new motor vehicle.
Sales tax – Individuals will no longer be able to take an itemized deduction for state and local sales tax.
Educator expenses – Teachers will no longer be allowed to deduct out of pocket expenses incurred for school supplies. In the past, a deduction from adjusted gross income of up to $250 was allowed.
Roth IRA conversion – There are no income limits in 2010 for individuals that would like to convert a traditional IRA to a Roth IRA. Also, for any conversions in 2010, the tax will be paid in 2011 and 2012.
Phase outs - In 2010, there will be no phase out of itemized deductions or personal exemptions. This change will greatly benefit high income earners.
Unemployment income – In 2009, those receiving unemployment benefits can exclude up to $2,400 from their taxable income. This tax benefit will no longer be available in 2010.
Charitable distributions / contributions – Charitable distributions made directly from an IRA account to a qualified charity will no longer be excluded from your income
Home buyers credit – If you got on the home buyers tax credit gravy train back in 2008, you are required to start paying the credit back in 2010.
Alternative Minimum Tax – The AMT exemption is scheduled to decrease to $33,750 for single filers and to $45,000 for those filing a married joint return.
Retirement contributions - There is no change in the maximum contribution and individual can make to a 401(k) plan in 2010. This remains at $16,500. The catch up contribution of $5,500 for individuals age 50 + also remains the same.
Mileage reimbursement rates – Theupdated mileage reimbursement rates effective for January 1, 2010 are $0.50, $0.165 and $0.14 for miles incurred for business purposes, medical purposes and charitable purposes, respectively. These rates just changed yesterday.
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