Well boomers, it's a wonder some times how we can cope with getting our taxes done on time. How many years have we seen our tax laws change? And doesn’t it always end up to just mean we owe more?
As this tax season comes toward a close, I asked Cheryl Drum, EA at JK Harris and Company, to go over the changes to the tax code that this year brought. Here’s her summation.
*The business mileage rates went down to $.50 per mile, based on the gas prices being low the last half of 2009.
*The alternate minimum taxable exemption amounts were set to go back to the old levels, but at the last minute they actually increased for all filing statuses. Single - head of household - $45,450. Married - filing joint or qualifying widower - $72,450. Married filing single - $36,225. The rules remain the same for calculating AMT income.
*You still have the provision to deduct the state and local taxes on Schedule A, you have to itemize to do so. And if your state is not subject to state income tax, you now have the option to deduct sales tax instead -- or you can take the higher of the two. The IRS has tables for your county and your state, so you don't have to keep up with all the sales receipts.
*A change for property taxes: back in 2008 and 2009 taxpayers who didn't itemize could add their real estate taxes back to their standard deduction. This was capped at $500 for single and $1000 for married filing jointly. This gave seniors that didn't have enough to itemize a chance to increase their standard deductions. For 2010 that option is no longer available, so they would have to use Schedule A to itemize their real estate taxes. Property taxes have always been itemized on Schedule A.
*There is no provision for excluding jobless benefits in 2010, that was just the one time exclusion in 2009.
*The earned income credit (EIC) had no changes to the general rule. You still can qualify for earning some tax credit based on the number of kids (up to 3 or more). If you are married filing jointly and have up to 3 or more kids, you can earn up to $48,352 and still qualify for a little bit of the EIC. The phase limits have increased for all filing statuses. The maximum credit is $5,666.
*The higher education tuition deduction was another provision that passed at the last minute in 2010. It is the same as it had been, you have to use Form 8917 to claim the tuition and fees deduction and the maximum amount is $4,000. Depending on your income you could either get a $4,000 deduction, $2,000 deduction or no deduction at all if you make too much money. There were no changes to the education credits.
This column is written for a Baby Boomer, by a Baby Boomer. It uses nostalgia to bring readers back to where it all began and then gets answers from personal finance experts to help navigate best routes for a healthy and prosperous future. E-mail your questions or topic ideas to firstname.lastname@example.org.