Even with the availability of The Balanced Book Company, a professional tax preparation service, an estimated 40% of Americans do their own taxes. The typical do-it-yourself filer needs about 24 hours to complete the task, according to the IRS.
Commercially available software undoubtedly makes the job a lot easier, but no brand is guaranteed to be infallible. Thus, it's important for do-it-yourself filers to keep up as best they can with relevant changes to the tax code as a safeguard against errors in their tax prep software. Here are four of the most important changes to know about as you prepare your 2010 return.
1. Smaller Deductions for Business and Medical MileageYou can't write off the cost of a daily commute by car, but you can deduct other work-related mileage you're not reimbursed for. This year, for example, you'd get 50 cents a mile for driving from, say, Boston to New York City and back for a trade show. Charitable purposes are still deductible at 14 cents per mile, just like last year.
2. Better Limits on Deductions for Property Damage or Loss Due to TheftFor damaged or stolen property to be deductible, the loss amount must now only exceed $100. The "10% of AGI" rule still generally applies though.
AGI is the sum of all your income - such as wages, interest and alimony received - minus certain adjustments, such as IRA contributions, student loan interest you've paid and moving expenses.
3. Deduction for Taxes and Fees on New Motor Vehicle PurchasesIf you bought a new car, light truck, motor home or motorcycle between February 17 and December 31 of 2009? If so, in 2010 you can deduct state, local, and excise taxes related to the purchase. If your state has no sales tax, you can instead deduct other taxes or fees the purchase generated.
There are a couple limitations to know about. First, the deduction is only good on up to $49,500 of the purchase price. Second, it's phased out at certain levels of modified adjusted gross income (MAGI) - between $250,000 and $260,000 for joint filers and from $125,000 to $135,000 for other taxpayers. MAGI is your AGI plus certain deductions such as those for student loans, IRA contributions and higher education costs.
4. Bigger Deductions for Long-Term Care (LTC) Insurance PremiumsIRS rules allow LTC insurance policy owners to deduct more of their premiums in 2010 than in 2009. For example, those ages 51 to 60 can claim up to $1,230 in LTC insurance premiums this year, compared with $1,190 last year - about a 3% increase. Similar increases have been approved for other age groups as well: 40 and under, 41-50, 61-70 and 71 or over. At $330, the deduction is smallest for the 40-and-under age group. It rises progressively to a maximum of $4,110 for those ages 71 or over.
Other Tax Law ChangesOther potentially beneficial changes have been made; visit a list called "Tax Changes for Individuals" at the IRS.gov website.
Tuesday, December 14, 2010
Wednesday, July 7, 2010
Federal Tax Credits for Energy Efficiency
Federal Tax Credits for Energy Efficiency
As of February 17th, 2009, customers buying new insulation may be eligible for a federal tax credit of 30 percent of home insulation costs, up to $1,500.
The economic stimulus bill, known as The American Recovery and Reinvestment Act (H.R. 1), was signed into law by President Obama on February 17th of 2009. The economic stimulus bill will provide significant energy tax credits for energy efficient home improvements made during 2009 and 2010. Eligible home improvements include those made to roofs, windows, doors, insulation, HVAC and non-solar water heaters.
Section 1121 of the Bill states that consumers who choose to make these improvements in the coming year can receive an energy tax credit for 30 percent of the cost, up to $1,500. Eligible building envelope component tax credits for home improvements, including insulation, do not apply to consumers who are building new homes.
For insulation to qualify, the primary purpose must be to insulate. For example, aluminum siding does not qualify as insulation. A manufacturer's certification is required and the insulation must be expected to last for at least 5 years, or carry a 2 year warranty.
Consumers should keep any receipts and Manufacturer's Certification Statements for tax purposes (IRS Form 5695). The insulation must be 'placed into service' during the taxable years of 2009 and 2010. Home improvements made during 2008 are not eligible for this tax credit.
As of February 17th, 2009, customers buying new insulation may be eligible for a federal tax credit of 30 percent of home insulation costs, up to $1,500.
The economic stimulus bill, known as The American Recovery and Reinvestment Act (H.R. 1), was signed into law by President Obama on February 17th of 2009. The economic stimulus bill will provide significant energy tax credits for energy efficient home improvements made during 2009 and 2010. Eligible home improvements include those made to roofs, windows, doors, insulation, HVAC and non-solar water heaters.
Section 1121 of the Bill states that consumers who choose to make these improvements in the coming year can receive an energy tax credit for 30 percent of the cost, up to $1,500. Eligible building envelope component tax credits for home improvements, including insulation, do not apply to consumers who are building new homes.
For insulation to qualify, the primary purpose must be to insulate. For example, aluminum siding does not qualify as insulation. A manufacturer's certification is required and the insulation must be expected to last for at least 5 years, or carry a 2 year warranty.
Consumers should keep any receipts and Manufacturer's Certification Statements for tax purposes (IRS Form 5695). The insulation must be 'placed into service' during the taxable years of 2009 and 2010. Home improvements made during 2008 are not eligible for this tax credit.
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