Federal Tax Changes for 2010
There are relatively few tax changes for 2010, but the new tax provisions can have a tremendous impact on your financial future. Here is a look at what to expect for 2010.
IRA contribution limits
Age 49 and under: $5,000
50 and older: $6,000
401k contribution limits
Age 49 and under: $16,500
50 and older: $22,000
Gift tax exclusion: $13,000
Estate tax repeal
The federal estate tax has been eliminated for all individuals who die in 2010.
Roth IRA conversion
In 2010, the income qualification for a Roth IRA conversion is removed. This allows a person in any income bracket to switch their Traditional IRA to a Roth IRA. Although there is not a 10% penalty for this conversion, the money transferred will still be taxed as ordinary income. The benefit is that instead of deferring taxes, as in a Traditional IRA, a Roth lets your money grow completely tax free.
State and local sales tax deductions
Itemizers will no longer have the ability to choose to deduct their state sales tax payments instead of deducting their state and local income taxes in 2010.
The deduction for classroom supplies purchased by educators is no longer allowed in 2010, unless Congress extends it.
Tuition and fees deduction
The deduction for college tuition and fees that was up to $4,000 is no longer allowed in 2010.
Direct donation from IRA’s to charities
IRA owners 70 ½ or older who wish to donate a portion of their IRA money directly to a charity will no longer be allowed.
Credit for energy saving home improvements
The 30 percent tax credit of the cost of energy-saving home improvements reverts to 10% and is capped at $500.