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Estate Tax Repealed
The federal estate
tax is scheduled to be eliminated for estates of individuals who die
in 2010. We expect Congress to act in 2009 to keep the tax alive.
Roth IRA
Conversions
Starting in 2010,
individuals with more than $100,000 of modified Adjusted Gross
Income are free to switch a traditional IRA to a Roth IRA. For
conversions in 2010, taxpayers can spread the tax due over two
years. Half the tax will be due in 2011, and the remaining half will
be payable in 2012. Removing the limit on conversions effectively
eliminates the income limit on contributions to Roth IRAs. A
taxpayer with income too high to use a Roth will be able to
contribute to a traditional IRA (which does not have income limits
for contributions) and immediately convert to a Roth.
Domestic
Production Activities Deduction
In 2010, this
deduction increases to nine percent of qualifying business net
income. This deduction applies to businesses engaged in
construction, engineering or architectural services, film
production, or the lease, rental or sale of equipment you
manufactured. However, the rate remains 6 percent for oil and gas
companies.
State and Local
Sales Tax Deduction
The opportunity for
itemizers to choose to deduct their state sales tax payments instead
of deducting their state and local income taxes ends after 2009,
unless Congress acts to extend it.
Educators'
Deduction
This deduction for
up to $250 of classroom supplies purchased by educators lapses after
2009, unless Congress acts to extend it.
Nontaxable
Combat Pay Allowed for Earned Income Tax Credit (EITC)
The election to
include nontaxable combat pay in the calculation of earned income
for the Earned Income Tax Credit is not available after 2009, unless
Congress acts to extend it.
Tuition and Fees
Deduction
The deduction for
up to $4,000 of college tuition and fees expires after 2009, unless
Congress acts to extend it.
Direct Donations
of IRAs to Charity
Beginning in 2010,
the opportunity for IRA owners age 70½ to directly donate part of
their IRA balance to charity will disappear, unless Congress acts to
extend it.
Additional
Standard Deduction for Property Taxes
Starting in 2010,
non-itemizers will no longer be allowed to increase their standard
deduction by up to $1,000 of property taxes paid, unless Congress
acts to extend this break.
Limits on
Deducting Farm Losses
Beginning in 2010,
the amount of farm losses you can enter to offset nonfarm income is
capped at the greater of $300,000 or your net farm income over the
past five years. But this limit will apply only if you get federal
farm payments or Commodity Credit Corporation (CCC) loans. You can
take suspended losses in later years. The caps will also apply to
partners and S firm owners.
Exemptions for
the Alternative Minimum Tax
For 2010, the
exemption levels drop to $45,000 for married filing jointly, $33,750
for singles and heads of household, and $22,500 for married couples
filing separately. Congress is likely to act in 2009 to prevent this
from happening. Otherwise, more than 20 million filers will be added
to the AMT rolls.
Partial
Exclusion for Unemployment Benefits
For 2010, the first
$2,400 of unemployment benefits you receive is no longer tax-free.
Sales Tax
Deduction for New Vehicles
Beginning in 2010,
buyers of new vehicles no longer get a tax benefit for sales tax
paid on new vehicles, unless they itemize and elect to deduct sales
taxes instead of state income taxes.
Credit for
Energy-Saving Home Improvements
The 30 percent tax
credit of the cost of energy-saving home improvements reverts to 10
percent after 2010, and is capped at $500.
We greatly appreciate feedback on
any of our software products. Please send an e-mail to
info@1099fire.com with any feedback or comments
about any of our products or services.
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