No phaseouts on itemized deductions & exemptions in 2010
This may provide an opportunity for some notable tax savings. Historically, high-income taxpayers have been subject to a reduction in the value of itemized deductions and personal exemptions after a certain income threshold. In 2010, the phaseouts are gone entirely. In 2011, they are poised to return.
As IRS standard deduction and personal exemption amounts are indexed to inflation, you’ll see very little change there for 2010. The standard deduction for heads of household will rise by $50 to $8,400 for the 2010 tax year. Other standard deductions will stay put, and the personal exemption amount will remain at $3,650 for 2010.
Lower long-term capital gains rates through 2010
Unless Congress decides to extend these Bush-era cuts, capital gains tax rates will revert to pre-2003 levels in 2011. For 2010, the long-term capital gains rate for those in the 10% and 15% tax brackets is 0%. In 2011, it is set to go to 10%. If you fall into the 25%, 28%, 33% or 35% tax brackets, the capital gains rate is 15% in 2010 and 20% in 2011.
The dreaded estate tax to be revised in 2010
Zero percent estate taxes in 2010? That was the plan … but the reality is that estate taxes are likely to remain at current levels in 2010 with some retroactive lawmaking. In early December, the House voted to restore the estate tax for 2010; a week later, the Senate voted against temporarily extending 2009 estate tax levels into the coming year. The Senate will almost certainly take up the issue again this year. However, to prevent a complete repeal of the estate tax, any new legislation is expected to contain a retroactive provision. So instead of taking effect upon passage, any new estate tax law would likely be made retroactive to January 1, 2010.
In other words, don't plan on a sudden demise in 2010 in order to pass your estate on to your heirs without estate tax.
Don't forget the homebuyer tax credit
The homebuyer tax credit appeared a couple of years ago. In 2009, lawmakers improved upon the original tax break. Now the homebuyer tax credit is a true credit. That means it reduces your tax bill dollar-for-dollar and in this case, could get you a refund if your IRS bill is zero.
The credit amount was increased to an $8,000 maximum and it's not limited to strictly first-time buyers. Homeowners who've lived in their residences for a while and want to buy another one can get a $6,500 maximum credit.
Under the Worker, Home ownership and Business Assistance Act of 2009, signed into law on Nov. 6, 2009, you have until this April 30 to buy or sign a contract to buy a principal residence. You then get two more months, until June 30, to close on the property. If you're a first-time buyer, you also get the option of claiming the credit on either your 2009 tax return or waiting until you file your 2010 taxes next year.
