Filing taxes isn't a lot of fun, but maybe if you find out that you've got some cool deductions coming, it will make it easier to start. Here's a fun look at some of the changes in store for tax year 2010.
Let’s start with this news story I recently shot that will provide some of the most important breaks you’ll get this year. Then meet me on the other side for a super-condensed version of the nitty-gritty.
Now here’s a quick, concise, but complete look at changes for the 2010 tax year…
1. Tax credit of up to $8,000 for first-time homebuyers, $6,500 for existing homeowners
If you bought a home in 2010, you could qualify for a monster tax credit. (Credits are Nirvana in tax-land, because that’s a direct reduction of your taxes, not just a deduction from your income: Basically, they’re cash.)
Owned a house before? You could get a credit of up to $6,500. Property virgin? Up to $8,000. Very cool. Rules and exclusions, however, abound. If you think you might qualify, check out the minutia at this page of the IRS website.
2. Payroll tax credit
The good news: To try to get you out to the mall and thus get the economy back on it’s feet, last year you got a credit of 6.2 percent of your pay (the amount you pay into Social Security), capped at $400 for single filers and $800 for joint filers.
The bad news: You already got this money in the form of lower tax withholding in last year’s paychecks – it’s no help now.
3. Higher standard and itemized deductions
The standard deduction if you’re married and filing a joint 2010 tax return is $11,400, same as last year. If you’re single, however, your standard deduction increased by $250 to $5,700.
Good for the rich: As I mentioned in the video above, for tax year 2010, itemized deductions didn’t phase out as your income increased. If it’s deductible, you get to deduct it, no matter how much you made last year.
4. Free parking
If your company paid for your parking or transit costs last year, you don’t have to pay taxes on that benefit, providing it wasn’t more than $230 a month.
5. College tuition tax credit
Familiar with the Hope Credit? Well, forget about it. For tax years 2010 through 2012, it’s gone – replaced by the American Opportunity Tax Credit. If your adjusted gross income was less than $80,000 single, $160,000 joint, you get a credit of up to $2,500 per student, as long as the money was spent on tuition or books.
If you had higher income than the limits above, the credit starts phasing out.
6. Earned income tax credit
Got three or more kids? The maximum Earned Income Tax Credit goes up by $628.50 for 2010.
7. Deductible IRAs
If your modified adjusted gross income is less than $66,000 single or $109,000 joint, you can fully deduct money you contributed to an IRA, even if you’re covered by a retirement plan at work. Even if your income was higher than that, you might get a partial deduction.
8. Roth IRA conversions
In 2010, you could convert your regular IRA to a Roth, no matter how much you made. (In prior years, if you made too much, you couldn’t.) While you still have to pay taxes to do it, you can spread them over two years.
9. Estate tax exemption
If you died last year, your estate owes no taxes, no matter how rich you were. But then again, if you died last year, you’re probably not reading this.
10. Higher annual gift tax exemption
You could have given anyone (including me) up to $13,000 last year without owing any gift tax.
11. Credit for energy-saving home improvements
If you made any qualified energy-saving home improvements last year, you get a credit of 30 percent of the price, up to $1,500.
12. Educators’ deduction
You can deduct up to $250 per person – in other words, up to $500 for a couple of married educators filing jointly – of money you spent on books, supplies, computer equipment, and other stuff that you used in class unless it was reimbursed or you worked less than 900 hours during the school year.
13. Tuition and fees deduction
You can deduct up to $4,000 of college tuition and fees.