Tax News affecting Your 2010 Tax Refund
For most taxpayers, Congress’ bipartisan, election-year posturing during 2010 was a good thing. Despite the restoration of many Bush-era tax rules, there were also many changes made to the tax code; some by new legislation and some by expiration. Below is a list of some of the more interesting changes that occurred in 2010:
1. The 2010 Tax Relief Act retains, for another two years at least, the Bush-era favorable tax rates on long term capital gains and qualified dividends.
2. We will all see a two-percent increase in disposable income as a result of a lower FICA withholding rate in 2011.
3. First-time homebuyers who claimed the tax credit for homes bought after April 8, 2008 and before January 1, 2009 must, generally, begin recapturing that credit on their 2010 tax returns in equal installments over a 15-year period.
4. Married people have something new to cheer about – their standard deduction is now equal to twice the individual’s standard deduction. In addition, the full utilization of itemized deductions and personal exemptions are back in play regardless of one’s Adjusted Gross Income. Finally, while the Alternative Minimum Tax exemption has increased again, parity for married versus single taxpayers has finally been realized.
5. If you have children, and if you can keep them from aging past 17 until 2012, the Child Tax Credit is yours to enjoy. Should they continue to grow up and move onto higher education this year, you may qualify for the expanded American Opportunity Tax Credit.
6. IRA distributions may be tax-free when they are made directly to a charity. This includes required minimum distributions (RMDs) from Traditional, SEP and Simple IRAs.
7. This last item is not a change in legislation, but rather a unique situation created by legislation. Under a federal statute enacted decades ago, holidays observed by the District of Columbia impact the entire Nation. Therefore, with the District recognizing Emancipation Day, April 16th, as a legal holiday and using the 15th to celebrate it this year, the IRS will close all of its offices and push the filing deadline to April 18th.