Look Out for these New Tax Breaks

As you prepare your taxes for 2010 take a close look at some of the new tax breaks afforded to you; some have changed since 2009 but you’ll still be able to save money this year. It can get very confusing so use this as an easy guide but also continue to investigate yourself or speak with a tax preparer.

Energy Efficient Tax Credits: For 2010 you can deduct 30% of up to $5,000 spent on energy efficient additions to your home, such as heating systems, new windows, appliances and other items that make your home more efficient. You can tally up a total of $1,500 in credits. Hopefully you’ll be able to take advantage of this in 2010 because the cap will be lowered to $500 in 2011.

Extended Tax Breaks: Included in this section are above-the-line tuition deductions and fees and the $250 educator deduction, the choice to deduct state and local sales taxes instead of state and local income taxes if you itemize, and the deduction for mortgage insurance premiums.

But be careful because many tax breaks were not extended throughout 2010, such as a sales tax reduction on a new car purchase – something that was very popular last year. Also, among other tax breaks, an additional standard deduction for real estate taxes and net disaster losses are not included.

One note, the IRS needs more time to prepare their systems for these changes because Congress was late in extending them. Anyone claiming these above-the-line deductions or those of you who itemize personal deductions cannot e-file before February 14.

Alternative Minimum Tax Relief (AMT): The AMT exemption for 2010 is as follows – tax payers filing jointly equates to $72,450; single taxpayers and those of you who file as head of the household $47,450; and married couples filing separately is $36,225.

A Break for High-Income Tax Payers: In 2010 there is no limit on income, so those of you in the past who earned above specific limits can now take advantage of all personal exemptions and itemized deductions.

Income Limit Adjustments: In 2010 some of you who made more money may not have been slotted up to the next tax bracket. It’s important that you or your tax preparer investigate this because you may be entitled to claim specific exclusions, deductions and tax credits.  For instance, the income restrictions have been altered regarding the retirement savers credit, the exclusion for interest on U.S. savings bonds redeemed for higher education purposes and the earned income credit. If you could not take advantage of these income tax elements in 2009 it doesn’t mean you won’t be able to in 2010.

One other tip, go to the IRS website ww.irs.gov and investigate their Free File offer. There is a FAQ section to assist you with any questions you might have and a quick video to get you started. The IRS uses brand-name software to help you file your taxes for free. It’s easy and it’s another way for you to save money in 2010.

About the Author

The following post is from Kathryn Katz, a Certified Personal Finance Counselor who works for Consolidated Credit in Ft. Lauderdale, Florida. Their non-profit agency helps families through financial crisis using credit counseling, debt consolidation and financial education.