The Balanced Spreadsheet-Financial News, Budget Advice, Debt help, Financial Tips, and other advice

January 19, 2010

2010 Tax Changes

Filed under: News Review, Personal Finance — Tags: , , , — thebalancedspreadsheet @ 11:55 am

I know it is only the beginning of January and 99.99% of you have not yet filed your federal income taxes for 2009 (including yours truly).  But it is never too early to start thinking about changes in the tax code affecting your 2010 Federal return.  The IRS has already published their 2010 tax changes.  Some of the bigger changes that stood out to me:

Recapture of $7,500.00 first time home buyer credit-This is NOT the $8,000 credit that began on January 1, 2009 and runs through April 30, 2010, but rather the $7,500 tax credit that was given to first time home buyers in 2008.  The “Credit” is to be re-paid over 15 years in $500 increments starting in 2010.  For those of you who need to repay the loan, you might want to have extra money withheld from your paycheck to cover the $500 extra in taxes you will owe each year.

ROTH IRA income limit-In 2010 the income limit to fully contribute to a ROTH IRA is $120,000 for singles and $177,000 for married filing jointly which is up from $105,000 and $166,000 in 2009.  Also in 2009 there was a phase out amount for singles between $106,000 and $120,000 and married filing jointly between $166,000 and $176,000.

Limits lifted on converting to a ROTH IRA-Starting in 2010, there will be no income limits for those wishing to convert their traditional IRA to a ROTH IRA.  Before 2010 the limit was $100,000.  This is good news for high earners in the past who were ineligible to contribute to a ROTH IRA.  To offset the huge possible tax impact, the money converted maybe be split in half in 2011 and 2012, thus spreading the tax liability over two years. 

Phase out of personal exemption and itemized deductions-For 2009 the phase out starts for those who earn greater then $166,800.  This is another help for high income earners. 

In addition to new 2010 tax laws, a few benefits expired in 2009 and will not be available for 2010.  Some that caught my eye:

Gone are deductions for state and local sales taxes:  If you itemized your deductions you could always choose the greater of your state and local income taxes or your state and local sales tax.  For most people with a state income tax, your income taxes would be greater.  However those states without a state income tax would usually then get to deduct their sales tax.  This will more then likely impact those people in states without state income taxes such as Florida, Texas, and Tennessee among others.

Exclusion from income of up to $2,400 in unemployment compensation-This will impact slightly those who have received extended unemployment benefits due to the recent unemployment spike. 

Those are the ones that I thought would impact the most people.  I would recommend checking out the whole list on the IRS website.  I personally like to know ahead of time changes in the tax code so you can plan accordingly.  As always these changes are always subject to change depending on what ever congress feels like doing on a particular day.  🙂


1 Comment »

  1. […] updated with 2010 taxes rates and deductions.  For those of you who itemize please take a look at 2010 Tax changes that I blogged about in […]

    Pingback by 2010 Standard Deduction Spreadsheet « The Balanced Spreadsheet-Financial News, Budget Advice, Debt help, Financial Tips, and other advice — April 15, 2010 @ 12:17 pm

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