Transcript Slide 1

WHAT'S NEW IN 2010?
What we are going to cover:
 2010 Tax Relief Act - New tax
provisions in 2010 and 2011
 Extenders for 2010
 Items affecting tax preparation in
2010 and beyond
 Continuing ARRA provisions
NTTC TRAINING 2010
1
BUSH TAX RATES CONTINUED*
 The 2010 Tax Relief Act:
 Extends all individual rates at 10, 15, 25,
28, 33 and 35 percent
 Continues for two years – through
December 31, 2012
* Affects 2010 tax returns
NTTC TRAINING 2010
2
PAYROLL TAX CUT
 The 2010 Tax Relief Act reduces the
employee-share of Social Security taxes
from 6.2% percent to 4.2%
 The change is for wages earned in calendar
year 2011 up to the taxable wage base of
$106,800
 Self-employed individuals will pay 10.4% on
self-employment income up to the threshold
 Employer’s share of OASDI remains at 6.2%.
NTTC TRAINING 2010
3
IMPACT OF EXTENDED TAX
RATES AND PAYROLL TAX CUTS
 Example of the impact of extended tax rates
and cut in payroll taxes:
 Individual earning $50,000 in 2011 will:
 Have approximate tax savings in
income tax & payroll tax rate reductions
of $890 and $1000 respectively
 Thus have an approximate total in tax
savings of $1,890 over what was
scheduled under the EGTRRA sunset
NTTC TRAINING 2010
4
QUALIFIED CAPITAL GAINS
AND DIVIDENDS*
 Qualified capital gains and dividends
currently are taxed at a maximum rate of
15 percent (zero percent for taxpayers in
the 10 and 15 percent income tax brackets)
 The 2010 Tax Relief Act continues for two
years – until December 31, 2012
* Affects 2010 tax returns
NTTC TRAINING 2010
5
MARRIAGE PENALTY RELIEF
 The 2010 Tax Relief Act extends marriage
penalty relief for two years, through
December 31, 2012.
 The 2011 standard deduction for married
couples filing jointly (originally to be
$9,650) will be $11,600 for 2011
 This compares to $11,400 for 2010
NTTC TRAINING 2010
6
CHILD TAX CREDIT
 The 2010 Tax Relief Act extends the $1,000
child tax credit for two years, through
December 31, 2012.
 The qualifying child must be under age 17 at
the close of the year and satisfy relationship,
residency, support, citizenship, and
dependent tests.
 Under EGTRRA’s sunset rules, the child credit
was scheduled to revert to $500 per child
NTTC TRAINING 2010
7
EITC AND DEPENDENT CARE
 Extends the enhanced EITC for two years
(i.e., three or more qualifiying children)
 Extends the enhanced dependent care
credit and eligible expenses for two years
 From $2,400 to $3,000 and $4,800 to
$6,000 for more than one qualifying
individual
 Maximum credit from 30% to 35 % of
qualifying expenses
NTTC TRAINING 2010
8
MORTGAGE PREMIUM
INSURANCE
 Under current law, taxpayers may deduct
certain premiums paid for qualified
mortgage insurance during the tax year on
a qualified residence.
 The deduction is subject to phase-out
based on a taxpayer’s income.
 The 2010 Tax Relief Act extends the
deduction for one year subject to some
limitations.
NTTC TRAINING 2010
9
EDUCATION CREDIT
 The 2009 Recovery Act enhanced and
renamed the Hope education credit as the
American Opportunity Tax Credit (AOTC)
for 2009 and 2010.
 The 2010 Tax Relief Act extends the AOTC
for two years, through December 31, 2012.
NTTC TRAINING 2010
10
STUDENT LOAN INTEREST
 Originally the law eliminated a 60-month
rule for the $2,500 above-the-line student
loan interest deduction and expanded the
modified AGI range for phase-out. This
treatment was scheduled to expire after
December 31, 2010.
 The 2010 Tax Relief Act extends the
enhancements for two years, through
December 31, 2012.
NTTC TRAINING 2010
11
AMT PATCH*
 The 2010 Tax Relief Act increases the
exemption amounts for 2010:
 $47,450 for individual taxpayers
 $72,450 for married taxpayers filing
jointly and surviving spouses
 $36,225 for married couples filing
separately.
* Affects 2010 tax returns
NTTC TRAINING 2010
12
EXTENDERS: 2010 & 2011*
State and local sales tax deduction
Higher education tuition deduction
Teacher’s classroom expense deduction
Charitable contribution of IRA proceeds
Charitable contributions of appreciated
property for conservation purpose
 Additional standard deduction for real
property taxes NOT extended to 2010





* Affects 2010 tax returns
NTTC TRAINING 2010
13
ESTATE TAX COMPROMISE*
 The 2010 Tax Relief Act revives the estate
tax for decedents dying after December 31,
2009, but at a higher applicable exclusion
amount and lower tax rate
 The maximum estate tax rate is 35% with an
applicable exclusion amount of $5 million
 This new estate tax is temporary and is
scheduled to sunset on December 31, 2012.
* Affects 2010 tax returns
NTTC TRAINING 2010
14
OPTIONS FOR 2010 ESTATE*
 2010 Tax Relief Act gives estates of 2010
decedents option to use 2010 or 2011 rules:
1. Carryover basis under 2010 rules
2. Stepped-up basis under 2010 rules with no
estate tax (small estates)
3. Stepped-up basis under 2011 rules with
estate tax
 Election revocable only with IRS consent
* Affects 2010 tax returns: out of scope
NTTC TRAINING 2010
15
IRS IN-SCOPE CHANGES
FOR VITA-TCE
 Schedule C – up to $10,000 expenses –
same rules as Schedule CEZ (no losses, no
employees, no inventory)
 Schedule K-1 - royalties
 Two new “on-line” training modules and
tests:
 HSA – Health Savings Accounts
 COD – Cancellation of Debt
NTTC TRAINING 2010
16
ECONOMIC RECOVERY PAYMENT
 Some SS recipients may have received $250
ERP in 2010 (overlooked in 2009):
 Did not receive in 2009 when first eligible
 Same eligibility rules as in 2009: social
security, SSI, railroad retirement, or
veterans disability benefits in November
2008, December 2008, or January 2009
 Any Making Work Pay Credit in 2010 will be
reduced by this 2010 payment
NTTC TRAINING 2010
17
OTHER 2010 ARRA PROVISIONS
 First time homebuyer credit (FTHBC) –
extended closing on purchase of home to
9/30/10, if purchased by 4/30/10
 Repayment of 2008 FTHBC – at least 1/15th
(up to $500) must be repaid
 New motor vehicle purchased in 2009 (after
2/16/09) but did not pay sales taxes until
2010 – are eligible to deduct the amount
paid in 2010
NTTC TRAINING 2010
18
SAVINGS BONDS FROM REFUND
 For 2010, in addition to direct deposits, can
use refund to purchase savings bonds
 Can purchase up to three I bonds
 Can purchase for selves, beneficiaries, or
co-owners, or other persons, other than
selves;
 Use Form 8888
NTTC TRAINING 2010
19
QUALIFIED CHARITABLE
DISTRIBUTIONS*
 Extends exclusion for qualified charitable
distributions made in 2010 and 2011
 Qualified charitable distributions made in
January 2011 can be treated as having been
made on December 31, 2010, to satisfy the
taxpayer’s minimum distribution requirement
for 2010.
* Affects 2010 tax returns
NTTC TRAINING 2010
20
EXPIRED TAX BENEFITS*
 Waiver of Minimum Required Distributions
from IRAs and defined benefit plans
 $2400 unemployment compensation exclusion
 Standard Deduction increase for real estate
taxes and disaster losses
 Standard/Itemized Deduction increase for
sales taxes for purchase of new motor vehicle
 Certain tax benefits for Midwest disaster areas
* Affects 2010 tax returns
NTTC TRAINING 2010
21
WHAT’S NEW IN 2010
QUESTIONS?
COMMENTS?
NTTC TRAINING 2010
22