What You Need to Know About Key 2010 Tax Changes (1 of 3)

Your 2009 tax return is probably getting to the top of your “to do” list and while you must get your return prepared and submitted to the IRS, right now is a good time to start thinking about 2010. This year, there are new tax provisions, others, which were set to expire, have been extended and yet others have disappeared. Over the course of these next several days, we will outline the major tax law changes you should be aware of to minimize taxes. Of course, please be aware that some of these changes could be altered again by Congress before the year is through.

New for 2010

  • No estate tax: Although it is widely believed that Congress will enact legislation to address this, decedents dying after 2009, the estate tax is repealed. With this repeal, the stepped-up basis at-death transfer rule is also eliminated. However, this rule is alleviated somewhat with special elective step-up rules.
  • Roth IRA conversions: Regardless of income, taxpayers can convert traditional IRA accounts to Roth IRA accounts. Previously, taxpayers with modified adjusted gross income over $100,000 could not make the conversion. Also, married persons filing separate returns are now eligible to make the conversion. Note that the converted amounts are includible in income; however, for conversions taking place in 2010, a taxpayer can ratably include the amount over two years in 2011 and 2012, if they so choose.
  • Recapture of first-time homebuyer credit: For first-time homebuyers who purchased a principal residence before Jan. 1, 2009, and took the then-$7,500 credit, 2010 marks the first year of recapture, in what amounts to a $500 repayment.
  • Phase outs of itemized deductions and personal exemptions: The overall limitation on itemized deductions for taxpayers with AGIs above a threshold amount does not apply. The phase-out for personal exemptions for higher income taxpayers also does not apply.

Watch this blog tomorrow when we discuss the tax laws which are expiring in 2010.