THE IRS recently announced preliminary tax law changes taking effect for the 2011 tax season. As is the usual process, more changes and updates will be expected to take effect between now and January 15, 2011 but we will keep the readers apprised of these changes as they unfold.
In the meantime, the changes below might be applicable to your tax return and going through them might be of substantial help to your tax planning strategies. Yes, we can not overly emphasize on the importance of tax planning strategies!
Unemployment income
In 2009, individuals who received unemployment income received a break from Uncle Sam by having the first $2,400 excluded from taxes. Unfortunately, not this year as that law expired at the end of 2009. All unemployment compensation will be included in total income for 2010.
Educator expenses
In the past, educators have been allowed to deduct up to $250 of out-of-pocket ordinary and necessary class room-related expenses as an adjustment to income. This deduction expired at the end of 2009 and will not be available in 2010 unless Congress acts to extend this deduction.
General sales taxes
The option for taxpayers to deduct state and local general sales tax as an itemized deduction expired at the end of 2009. You will still be able to deduct state and local income tax paid in 2010, but not state and local general sales tax. Congress may act to extend this benefit.
Non-itemized real property tax deduction
Taxpayers taking the standard deduction in 2010 will no longer be able to increase the standard deduction by up to $500 ($1,000 if married filing jointly) for the amount of real estate taxes paid. Real estate taxes can still be deducted as an itemized deduction. Congress may act to extend this benefit.
IRA contribution and deduction limits
The contribution limit to a traditional or Roth IRA for 2010 is now at $5,000. If you reach age 50 before 2010, this limit is increased to $6,000. Individuals that are covered by a retirement plan at work may only make deductible IRA contributions if their income is under certain thresholds. For 2010, that threshold is $66,000 if single and $109,000 if married filing jointly or qualifying widow(er).
Standard deduction
If you do not itemize your deductions, you may claim the standard deduction which varies according to your filing status. The 2010 standard deduction amount for your filing status is $5,700. If you use the standard deduction you are allowed an additional amount of $1,100 ($1,400 for single or head of household) per individual as an increase to the standard deduction if you and/or your spouse are 65 or over. An addition to the standard deduction in the same amount is also allowed for each individual if you and/or your spouse are blind.
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Evangeline can be reached at her marketing location at the Ground Floor of Eagle Rock Plaza (in front of Jollibee), 2700 Colorado Blvd., Los Angeles, CA 90041 or at her business address at 450 N. Brand Blvd., Ste. 600, Glendale, CA 91203, phone number (323) 356-3803 or (323) 254-6787.
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The purpose of this article is to provide information of general interest to our clients and prospective clients. The information provided is general in nature and should not be considered complete information on any product or concept described.
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