Below information is Courtesy of J.K. Lasser
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which was signed into law on December 17, 2010, extended numerous tax breaks that had expired in 2009. However, not every expired provision has been extended, and there is much confusion about which rules apply for 2010 returns. Here is a list of tax breaks that applied on 2009 returns but do not apply in 2010.
Additional Standard Deduction for Real Property Taxes
In 2009, those who did not itemize deductions could add to their standard deduction up to $500 ($1,000 for joint filers) for real property taxes. The deduction was allowed for taxes paid on any property, such as a personal residence, vacant land, or a vacation home. This additional standard deduction has not been extended for 2010.
Additional Standard Deduction for Disaster Losses
In 2009, taxpayers who experienced property losses in federal disaster areas did not have to itemize in order to deduct uninsured losses; they could add the net disaster losses to their standard deduction amount. This additional standard deduction has not been extended for 2010.
For those who claim disaster losses in 2010, note that each loss must be reduced by only $100; in 2009, there was a $500 reduction. Personal disaster losses, after the reduction, can be deducted as itemized deductions on 2010 returns to the extent losses exceed 10% of adjusted gross income.
Sales Taxes on Car Purchases
In 2009, state and local sales tax on vehicle purchases was deductible, either as an additional standard deduction or as an itemized deduction. The deduction applied to taxes paid on new vehicles purchased from February 17, 2009, through December 31, 2009. The deduction was limited to the taxes and fees paid on up to $49,500 of the purchase price of an eligible vehicle. The deduction was reduced for joint filers with modified adjusted gross income (MAGI) between $250,000 and $260,000 and other taxpayers with MAGI between $125,000 and $135,000. Taxpayers with higher incomes did not qualify for any deduction. The deduction has not been extended for 2010.
Unemployment Benefits
In 2009, up to $2,400 in unemployment benefits were excludable from gross income. The exclusion applied without regard to adjusted gross income or overall benefits received. In 2010, all unemployment benefits are includable in gross income.
Additional IRA Contributions in Certain Bankruptcy Cases
If you participated in a 401(k) plan and the employer who maintained the plan went into bankruptcy, you were able to contribute an additional $3,000 in 2009 to your IRA if certain conditions were met. There is no additional IRA contribution allowed for 2010.
Suspension of Required Minimum Distributions
For 2009, owners and beneficiaries of IRAs and qualified retirement plans did not have to take annual required minimum distributions (RMDs). This suspension applied only for 2009. RMD rules continue to apply for 2010 and later years.
Business-Related Breaks
For self-employed individuals, certain deductions, credits, and other beneficial tax rules expired at the end of 2009 and have not been extended. These include:
- Five-year recovery period for depreciating farming business machinery and equipment.
- Extended net operating loss (NOL) carryback (there had been an option to carry NOLs back for up to 5 years).
- Reduced estimated tax payments for small business owners.
Tami Highbaugh-Abdullah
Highbaugh Tax
317.345.4182
