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Review this list of changes, we can discuss how each may effect you

  • The Standard Deduction amounts remain unchanged from 2009 except for head of household. (See the back inside cover.)The 2009 deduction for sales taxes on vehicles is gone.
  • The personal exemption is still $3,650. No phaseout for high earners but it may return in 2011. You can take an exemption only for the regular tax; add it back when you calculate the AMT.
  • For 2010 only, high-earners don’t lose any itemized deductions either, but next year, some of their itemized deductions will be subject to cuts.
  • The refundable “Making Work Pay” tax credit of up to 6.2% of earned income, capped at $400 for singles and $800 for marrieds, continues in 2010. The phaseout range: $75,000-$95,000 and $150,000-$190,000 respectively. Whereas the credit was delivered in 2009 via reduced withholding over 9 months, in 2010 that period becomes 12 months.
  • Certain street-legal electric golf carts can qualify for a credit of 10% of the vehicle’s cost. Although usable on golf courses, these carts are made mainly for use on public roads with low posted speed limits. Max: $2,500.
  • The tax credit for the purchase of a qualifying plug-in electric vehicle continues through 2011: up to $2,500, plus $417 for each kilowatt hour of battery capacity exceeding five hours. Maximum credit: $7,500.
  • There’s a new break for spouses of armed forces members: if their spouse’s duty moves them to another state, spouses can keep their home state for state income tax purposes. This change is retroactive to Jan. 1, 2009 and applies only to wages and personal services income (e.g. rental property income is excluded). Spouses from states with no or low state income taxes will benefit.
  • The increase in the earned income credit (EIC) for taxpayers with three or more qualifying children extends through 2010, with a maximum credit of $5,666. For married taxpayers with children filing a joint return, it is phased out completely at AGI $40,545 for one child, $45,373 for two children and $48,362 for three or more. For filers with no children, the credit is gone at AGI $13,460 (singles) and $18,470 (MFJ).
  • Taxpayers who work abroad and qualify get a higher foreign earned income exclusion, $91,500, and may be ableto claim a housing exclusion.
  • These items expired at the end of 2009 but may be reinstated by year-end: Tax-free IRA distributions to charity; tax deductions for state and local sales taxes and teachers’ supplies; the college tuition tax break; and the extra standard deduction for real property taxes paid by non-itemizers.
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