Earned income Credit: You may be able to take the EIC if:
- Three or more children live with you and you earned less than $43,352 ($48,362 if married filing jointly).
- Two children live with you and you earned less than $40,363 ($45,373 if married filing jointly).
- One child lived with you and you earned less than $35,535 ($40,545 if married filing jointly).
- A child did not live with you and you earned less than $13,460 ($18,470 if married filing jointly).
The maximum AGI you can have and still get the credit also has increased. You may be able to take the credit if your AGI is less than the amount in the above list that applies to you. The maximum investment income you can have and still get the credit is still $3,100.
Amount of credit increased. The maximum amount of the credit has increased. The most you can get for 2010 is:
- $3,050 if you have one qualifying child,
- $5,036 if you have two qualifying children,
- $5,666 if you have three or more qualifying children, or
- $457 if you do not have a qualifying child.
IRA deduction expanded: You may be able to get an IRA deduction if you were covered by a retirement plan and your 2010 modified AGI is less than $66,000 ($109,000 if married filing jointly or qualified widow(er)). If your spouse was covered by a retirement plan, but you were not, you may be able to take an IRA deduction if your 2010 modified AGI is less than $177,000.
The most can be contributed to a traditional IRA is the least of the following:
- $5000 ($6000 if tax payer is 50 years old or older)
- Taxpayer’s taxable compensation for the year.
- IRA Amount is taxable on distribution.
Recapture of first-time homebuyer credit: If you claimed the first time home buyer credit for a home you bought in 2008, you generally must begin to repaying it in 2010.
10% credit on homes up to $8,000 for houses purchased afterDec 31 2008and beforeMay 1 2010.
Roth IRAs: Half of any income that results from a rollover or conversion to a Roth IRA from another retirement plan in 2010 is included in income in 2011, and the other half in 2012, unless you elect include all of it in 2010. In addition, for any tax year beginning after 2009, you can make a qualified rollover contribution to a Roth IRA regardless of the amount of your modified AGI.
Alternative Minimum Tax (AMT): The AMT exemption amount is scheduled to decrease to $33,750 ($45,000 if married filing jointly or qualified widow(er); $22,500 if married filing separately).
Domestic Production activities income: The percentage rate for 2010 increases to 9%. However, the deduction is reduced if you have oil-related qualified production activities income.
Personal Casualty and theft loss limit reduced: Each personal Casualty or theft loss is limited to the excess of the loss over $100 (instead of $500).
Expiring Tax benefit: The following benefits are scheduled to expire and will not be available for 2010.
- Deduction for educator expenses in figuring AGI.
- Tuition and fees deduction in figuring AGI.
- Increased standard deduction for real estate taxes or net disaster loss.
- Itemized deduction or increased standard deduction for state or local sales or excise taxes on purchase of new motor vehicle.
- Deduction for state and local sales taxes.
- The exclusion from income of up to $2,400 in unemployment compensation.
- The exclusion from income of qualified charitable distributions.
- Government retiree credit.
- District of Columbia First-time home buyer credit (for homes purchased in 2009).
- Extra $3,000 IRA deduction for employees of bankrupt companies.
- Certain tax benefits for Midwestern disaster areas, including the additional exemption amount if you provided housing for a person displaced by the Midwestern storms, tornadoes, or flooding.
Personal exemptions and Itemized deduction phase outs ended: For, 2010 taxpayers with AGI above a certain amount will no longer lose part of their deduction for personal exemptions and itemized deductions.
Allowance of certain personal credits against the AMT: The allowance of the following personal credits against the AMT has expired.
- Credit for Child and dependant care expenses.
- Credit for the Elderly or the disabled.
- Lifetime learning credit.
- Mortgage interest credit.
- Credit for non-business energy property.
- District of Columbiafirst-time home buyer credit.