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

Over the past few days, we talked about new tax laws and those that are expiring in 2010. But what about those tax advantages that expired at the end of 2009? You will want to take particular note of these and watch to see if they return before December 31, 2010.

Expired in 2009

  • Sales taxes paid on new vehicle purchases: If you purchased a new car after Feb. 17, 2009, and before Jan. 1, 2010, the sales tax paid on up to $49,500 of the purchase price was deductible. The deduction phases out for higher income taxpayers.
  • Increased AMT exemption amounts: For 2009, the AMT exemption amounts were $70,950 for married filing jointly, $35,475 for married filing separately, and $46,700 for singles and heads of household. For 2010, the exemption amounts are significantly lower (unless Congress acts to adjust them): $45,000 for married filing jointly, $22,500 for married filing separately, and $33,750 for singles and heads of households.
  • Waiver of required minimum distributions (RMDs) for IRAs and other retirement savings plans: When a taxpayer turns 701/2, he or she is required to take a distribution from his or her retirement account. However, for 2009, that rule was eliminated. Beginning in 2010, the RMD rule returns.
  • Unemployment compensation: 2009 marked the only year that the first $2,400 of unemployment compensation received was not includible in income.
  • Tuition deduction: An above the line deduction for qualified tuition and related expenses, up to $4,000, depending on income.
  • Research credit: The tax credit for research and experimentation expenses.
  • Bonus depreciation: The additional first-year depreciation for 50% of basis of qualified property.
  • Deduction for state sales taxes: The election to deduct as an itemized deduction state and local sales taxes instead of state and local income taxes.
  • Charitable contributions from IRA accounts: The ability to distribute up to $100,000 tax free to charity from an IRA maintained for an individual whose has reached age 701/2.
  • Educator expense deduction: The $250 above the line deduction for qualifying educators for expenses paid for books and supplies used in the classroom.
  • Increased first-year asset expensing: For 2009, the amount eligible for asset expensing was $250,000.
  • D.C. first-time homebuyer credit: Purchases made before Jan. 1, 2010, qualify for the $5,000 D.C. first-time homebuyer credit.
  • Nonrefundable personal credits offsetting AMT: Only through 2009 could nonrefundable personal credits offset a taxpayer’s alternative minimum tax. However, this rule does not apply to the adoption credit, the child tax credit, the saver’s credit, the residential energy efficient property credit, and the American Opportunity credit, among others.

While there are other minor changes that have taken place from 2009 to 2010, the changes we looked at over the last three days are the tax changes that most likely will impact your 2010 taxes. Watch this blog for more tax information updates throughout the year.