Licensed Tax Practitioners
Tax Preparation and IRS Representation
Practice limited to Taxation - Not a CPA firm
2010 TAX LAW CHANGES
This page only deals with tax law changes affecting 2010 tax returns (which are due April 18, 2011 since April 15 is a local holiday in Washington, D.C. where the IRS is headquatered). For tax law changes that became effective on January 1, 2011 (including those that expired on December 31, 2010) and therefore affect your 2011 return (which is due April 16, 2012 since the 15th is a Sunday) please see our 2011 TAX LAW CHANGES page.
Readers may also want to check out our OTHER TAX NEWS page as well.
Sales Tax deduction for itemizers renewed for 2010 & 2011
December 17, 2010
The option to deduct sales taxes instead of state & local income tax has been renewed, extending it through 2011. So residents of states without a state income tax (including Texas) have retained a valuable deduction.
$250 Teacher classroom supplies deduction extended.
December 17, 2010
The Educators Expense deduction for teachers' unreimbursed purchases of classrom supplies has been renewed. If a classroom teacher's expenses exceed $250 they can be deducted Form 2106, subject to the 2% of income floor which will eliminate any tax benefit in many cases. However in the case of a teacher filling a joint return, if their spouse is claiming job-related expenses as well, the 2% floor applies to the couple's total expenses allowing teachers additional tax benefits from their expenses between $250 and 2% of income.
Last minute "AMT patch" avoids tax increase for millions of taxpayers
December 17, 2010
Another "patch" to the Alternative Minimum Tax (AMT) has been passed (better late than never). Under the AMT personal and dependent exemptions are not allowed. Instead a special AMT exemption is allowed. The exemption amount has not been permanently indexed to inflation, so Congress has periodically made temporary changes to the amount of the AMT exemption to keep pace with inflation. This temporary "patch" for 2010 has been signed into law. Should this "temporary fix" provision ever be allowed to expire, it will cause the exemption amount to revert to the lower tax year 2000 levels. This will cause an tens of millions of middle-class taxpayers to be hit with the AMT, in effect raising their taxes.
Unemployment Benefits once again fully taxable
December 31, 2010
The one-time (2009) exclusion of the first $2,400 of unemployment benefits from income has expired. All unemployment benefits are once again fully taxable.
Tuition & Fees Deduction renewed for 2010 and 2011 tax years
December 17, 2010
This popular middle class "above-the-line" deduction (a reduction in income before taking the standard or itemized deduction) for higher eductation which was scheduled to expire at the end of 2009, has been extended through 2011.
Standard Deduction increase for property taxes has EXPIRED
December 31, 2010
The ability to deduct part of the property taxes on your home (up to $500 single, $1,000 joint) without itemizing, by adding it to your standard deduction, has expired. This has the most impact on taxpayers living in states with high property taxes (typically those with no state income tax, like Texas).
No increased Standard Deduction for sales taxes paid on new vehicle purchased in 2010
December 31, 2010
Some taxpayers who purchased new vehicles in 2009 were able to deduct their sales tax even if they took the standard deduction. This special adjustment to the standard deduction has expired. However if you itemized your deductions, you may still claim sales taxes paid on the purchase of new or used vehicles by including it your itemized deduction for taxes paid.
Of course there are always exceptions. If you purchased your new vehicle in late 2009 but didn't pay the sales tax until 2010 you can still take advantage of this deducion.
Required Minimum Distribution (RMD) from retirement accounts returns in 2010
December 31, 2010
Generally, taxpayers over 70 years old and beneficiaries of inherited IRAs are forced to withdraw funds from retirement accounts and pay income tax on the distribution. This requirement had been waived for tax year 2009 only due to the economic crisis. The RMD requirment is back in place for 2010 and subsequent tax years.
Casualty Loss from Federally declared disasters again subject to 10% of AGI floor
December 31, 2010
Most casualty losses are only deductible if they exceed 10% of income. However, many Houston area residents benfited from a waiver of this rule for losses related to federally declared disasters that occured in 2008 or 2009 such as Hurricane Ike. This waiver has expired and the regular rules once again apply to disaster losses.
Standard Deduction increase for disaster losses has EXPIRED
December 31, 2010
Net disaster losses can no longer be added to the standard deduction. Taxpayers must itemize in order claim such losses.
Food for Thought
If Pro is the opposite of Con, what is the opposite of Progress?
Retroactive tax law changes signed into law (Finally!!)
Congress has once again failed to pass tax law changes including tax rates and extensions of certain popular tax breaks (such as the $250 classroom supplies deduction for teachers, sales tax deduction, etc.) until the very last minute. These changes were not signed into law until December 17, 2010.
Unfortunately this is nothing new, but it does make tax planning rather difficult. How can you plan your big-ticket purchases if you don't know if the sales tax will be deductible this year or not?
Some years, the extensions of the expired laws occured so late in the year (though retroactive to the first of the year) that the tax forms had already been printed assuming that the tax break would remain expired, that is not retroactively renewed. As a result many taxpayers who prepared their own taxes or used unlicensed preparers failed to claim all their legitimate deductions.
Is it any wonder that Congress has such a low approval rating?
DEFICITS AND THE NATIONAL DEBT
Want an easy to understand explanation of federal budget deficits and our national debt? We recommend Glenn Beck's new book "BROKE". He approaches it from a conservative perspective with a dose of morality of course, but even if you don't like his political or social outlook, it's still a good explanation.
Copyright 2011 by Cooke & Company, Professional Tax Preparers.
Serving Spring, Conroe, The Woodlands, and Houston, TX
This website last updated February 4, 2011.
