11 Big Tax Changes You Need to Know Before You File
Mar 15th 2011 10:00AM
Updated Mar 15th 2011 1:31PM
It's important to make sure that you have the most recent information to accurately file your tax return. To give you a head start, here are a few notable changes for the 2010 tax year:1. Unemployment Compensation Is Taxable
In 2009, taxpayers who received unemployment compensation caught a tax break in the form of an exclusion from income: up to $2,400 of unemployment compensation was not taxable. However, for 2010, there's no such exclusion, and the normal rules apply.
2. Deductibility of Medicare Part B for Self-Employed Taxpayers
In 2009, Medicare Part B premiums weren't deductible for purposes of self-employed health insurance premium, but the IRS changed course in 2010. In 2010, Medicare Part B is deductible as a self-employed health insurance premium.
3. Required Minimum Distributions Return
The rules governing IRAs grew more complicated in 2010 after a quirky break the year before. For 2009, those taxpayers over the age of 70½ weren't required to take their required minimum distributions. However, things were back to "normal" in 2010 with the traditional requirements in place.
4. Self-Employed Health Insurance Deductions Apply for Children Who Aren't Dependents
As of March 30, 2010, if you were self-employed and paid for health insurance, you may be able to deduct the cost of those premiums you paid to cover your child who was under age 27 at the end of 2010, even if the child was not your dependent. This is significantly different from prior years.
5. Disappearing Deductions
In 2010, the increased standard deduction for real estate taxes or a net disaster loss from a disaster occurring after 2009 have disappeared. Additionally, the itemized deduction or increased standard deduction for state or local sales or excise taxes on the purchase of a new motor vehicle have also disappeared. (There's an exception for the rare circumstance in which you bought the vehicle in 2009 and paid the tax in 2010).
6. Adoption Credit Increased and Expanded
Another change to the tax laws as a result of the health care law is that the maximum adoption credit has increased to $13,170. Even better, the credit is now refundable, which means if you qualify, you can get money back even if you don't owe.
7. Standard Mileage Rates Increased
Despite the fast-paced increase of gas prices in 2011, the rates for 2010 remained relatively stable. The 2010 rate for business use of your vehicle is reduced to 50 cents per mile, down from the 2009 rate of 55 cents per mile. The 2010 rate for use of your vehicle for medical care or moving related to your job is reduced to 16½ cents per mile, down from the 2009 rate of 24 cents per mile. Miles driven for charitable purposes remain fixed at 14 cents per mile.
8. Alternative Minimum Tax (AMT) Exemption Amount Increased
With a couple of weeks to spare, Congress finally got its act together and upped the AMT exemption amounts for 2010. The AMT exemption amount for 2010 increased to $47,450 for individuals; $72,450 for married couples filing jointly or a qualifying widow(er); and $36,225 if married filing separately.
9. Personal Casualty and Theft Loss Limit Reduced
After a boost in 2009 to $500, each personal casualty or theft loss is limited to the excess of the loss over $100 in 2010.
10. New Mailing Addresses
If you are filing a paper return, you may be mailing your return to a different address for the tax year 2010. Check the instructions carefully and don't rely on the instructions (or old pre-addressed envelopes) from 2009.
11. Tax Preparer Changes
New laws governing tax preparers went into effect for 2011, which affect the filing of your 2010 returns. A new law requires some paid preparers to e-file returns they prepare and file; ask first if you don't wish to e-file. Additionally, tax preparers must now register with the IRS and obtain what's called a PTIN in order to prepare a paid return. Make sure that your tax preparer is ready and able to assist you this tax season.
If you're feeling a little overwhelmed with all these changes, you're not alone. To make sure that you file a complete and accurate return, double-check the dates on IRS publications (the IRS has been constantly updating publications and the IRS website) and use the most current versions of tax forms and instructions. And as always, check with your tax professional -- and stop by WalletPop -- to get the most current information.