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2009 Tax Benefits Extended in 2010

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Every year there are just so many changes in the tax law and it seems that we really have to be on top of things for us to take advantage of the various tax savings. In tax year 2009, there are a lot of tax benefits that sprung out to help the American people weather the economic storm. The government passed the American Recovery Reinvestment Act creating more tax benefits to the people. However, some of those tax benefits have expired and will not be extended in 2010.

1. Deduction for educator expenses in figuring  adjusted gross income (AGI)

If you are a teacher, instructor, counselor, principal, or aide who worked in a primary and secondary schools (kindergarten through grade 12) for at least 900 hours during a school year, then you can deduct up to $250 of qualified expenses such as books, school supplies, equipment (computer, software, printers, etc), and other materials used in the classroom. Expenses used for home schooling or non-athletic supplies for courses in health or physical education do not qualify.

2. Tuition and fees deduction in figuring AGI

You may be able to deduct qualified education expenses of up to $4,000 paid during the year for yourself, your spouse, or your dependent(s). You cannot claim this deduction if your filing status is married filing separately, if another person can claim an exemption for you as a dependent on his or her tax return, or if you make more than $80,000 for single ($160,000 for married filing joint). For a more detailed explanation, please read the post on Tuition and Fees Deduction.

3. Deduction for state and local general sales taxes

Taxpayers may be able to deduct either the state general sales taxes or the state income taxes but not both. These are reported on Schedule A – Itemized Deductions of Form 1040. Usually benefits taxpayers who lived in a state that does not have a state income tax.

3. District of Columbia first-time homebuyer credit.

Tax credit of up to $5,000 for married taxpayers or $2,500 for taxpayers and is available to any first-time buyer in the District and the taxpayer may even qualify even he/she own or previously owned a home in another jurisdiction as long as it is not the District.

4. Allowance of certain credits against the alternative minimum tax (AMT)

Such as the credit for child and dependent care expenses, credit for nonbusiness energy property, credit for the elderly or the disabled , lifetime learning credit , mortgage interest credit , and District of Columbia first-time homebuyer credit

5. Gambling Withholding Rates

Regular gambling withholding rate remains 25% for 2011, and the backup withholding rate remains 28% for 2011.

6. Exclusion from income of qualified charitable distributions made from IRA accounts

Generally, if you withdraw funds from your IRA before you reach 59 1/2 years of age, the funds will be included in your taxable income. This exclusion allows you to make charitable inclusion using your IRA accounts without incurring any taxes.

7. Special deduction limit for qualified conservation contributions, and special rules for donations of food inventory.

Tax Benefits Not Extended to 2010:

  • Increased standard deduction for real estate taxes or a net disaster loss from a disaster occurring after 2009.
  • Itemized deduction or increased standard deduction for state or local sales or excise taxes on the purchase of a new motor vehicle after 2009.
  • The exclusion from income of up to $2,400 in unemployment compensation.
  • Extra $3,000 IRA deduction for employees of bankrupt companies.
  • Decreased estimated tax payments for certain small businesses.
  • Credit to holders of clean renewable energy bonds issued after 2009.
  • Certain tax benefits for Midwestern disaster areas, including increased Hope and lifetime learning credits and the additional exemption amount if you provided housing for a person displaced by the Midwestern storms, tornadoes, or flooding.
  • Alternative motor vehicle credit for qualified hybrid vehicles weighing more than 8,500 pounds.
  • In addition, the personal casualty and theft loss limit remains the excess of the loss over $100 (instead of the $500 limit that applied for 2009), and federally declared disasters occurring in 2010 are subject to the 10%-of-AGI limit.