Summary of 2010 Tax Law Changes

2010 brings a number of federal tax law changes. Certain deductions and benefits are no longer available and there are many changes in rate structures and phase outs. Below are some of the many changes for 2010. Please consult your account or tax attorney to learn how these changes affect you personally.

Estate Tax Repealed

The federal estate tax is eliminated for estates of individuals who die in 2010.

Roth IRA Conversions

Individuals with any amount of modified Adjusted Gross Income are free to switch a traditional IRA to a Roth IRA. Conversions are fully taxable at your regular tax rate. For conversions in 2010, taxpayers can spread the tax due over two years. Half the tax will be due in 2011, and the remaining half will be payable in 2012.

State and Local Sales Tax Deduction

Individuals will no longer be able to take an itemized deduction for state and local sales tax.

Educators' Deduction

Teachers are no longer able to deduct for out of pocket classroom supplies.

Nontaxable Combat Pay Allowed for Earned Income Tax Credit (EITC)

The election to include nontaxable combat pay in the calculation of earned income for the Earned Income Tax Credit is no longer available.

Tuition and Fees Deduction

The deduction for up to $4,000 of college tuition and fees is no longer available.

Direct Donations of IRAs to Charity

Charitable contributions from an IRA are no longer excluded from income.

Income Earned Abroad

The maximum foreign earned income exclusion is increased to $91,500.

Additional Standard Deduction for Property Taxes

Non-itemizers will no longer be able to increase their standard deduction by up to $1,000 of property taxes paid.

Alternative Minimum Tax

The exemption levels drop to $45,000 for married filing jointly, $33,750 for singles and heads of household, and $22,500 for married couples filing separately.

Unemployment Benefits

The first $2,400 of unemployment benefits you receive is no longer tax-free.

Sales Tax Deduction for New Vehicles

Buyers of new vehicles will no longer be able to take the itemized deduction or increase in standard deduction for sales tax on the purchase of a new motor vehicle.

Home Buyer Tax Credit

Eligible first-time home buyers can earn a tax credit up to $8,000 before April 30 and eligible current home buyers can earn up to $6,500.

Credit for Energy-Saving Home Improvements

The 30 percent tax credit of the cost of energy-saving home improvements is in effect through 2010.