It’s that time of year again! Sometime in the next few months you may be preparing, or having someone else prepare, a 1040 tax return form for 2010. First be aware of some changes that have been made since last year, says “the tax guy” from Smart Money.
First of all, in case you haven’t heard, the deadline for filing IRS taxes is a smidgen later this year. It will be April 18th because Emancipation Day, a holiday celebrated in Washington, D.C., falls on April 15th this year.
Your tax preparer may also file electronically this year. Congress has passed laws that are pressuring them to e-file, and it’s safe to say this is the direction we are going as a country. On that note, you may also have noticed that your annual year-end 1040 booklet from the IRS never showed up. It won’t. Ever. Again. 2009 was the last year it was mailed out. If you miss it, you can still find it at IRS.gov and at their walk-in taxpayer assistance centers or participating libraries and post offices.
Back to the 1040 itself. First we’ll look at some things that you may remember from last year (or previous years) which are now gone:
1) If you were among the nation’s many unemployed in 2009, the tax break you received is now gone. For 2009 the first $2,400 of unemployment income was tax free. Those unemployed in 2010 will pay taxes on 100% of your unemployment money. It’s all considered income.
2) Deductions for sales tax on new car purchases under the 2009 Stimulus Act are also gone for 2010.
3) Real estate tax deductions for filers who DON’T itemize their deductions are gone this year.
4) A “phase-out” rule for those who DO itemize deductions has been completely repealed for 2010 (and 2011 and 2012). This means itemized deductions such as mortgage interest and charitable donations no longer are being reduced as they have been for years. Personal and dependent exemption deductions are also no longer being reduced as they have been.
So, to the above we bid adieu. For now, anyway. Now let’s check out what’s new on the 1040 in 2010.
1) If you spent money adopting a child in 2010, the maximum tax credit has increased from $12,150 in 2009 to $13,170. It’s also now 100% refundable (meaning, if you subtract your tax credit from the taxes you owe and that number goes below zero, you receive that money in your refund). This credit was previously nonrefundable.
2) For 2010 only, self-employed people can deduct their health insurance premiums when calculating their self employment tax bills. Until now, the self employed were only able to deduct from their federal income tax bill — this year they can reduce both bills.
3) For people who bought a home in 2008 (and a few in 2009), this is the year they must start paying the government back for their homebuyer tax credit. At that time, the credit was more like an interest-free loan. So don’t panic if you bought your home in 2009 or 2010 — under most circumstances the money you received is yours to keep.
And there you go, changes you’ll see on your 1040 form for 2010 taxes.