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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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WHAT’S NEW IN 2010
QUESTIONS?
COMMENTS?
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