2010 Tax Breaks
Education Credit – Parents of students that are in their first four years of college can get a tax credit of up to $2,500 if the tuition, fees, and books total $4,000 or more. In 2011 the credits will decrease. These credits are phased out at higher income levels.
Energy Credit – In 2009 and 2010 homeowners can receive a tax credit on energy improvements. The credit is calculated by taking 30% of the costs up to $1,500. In order to get the maximum credit a homeowner would need to spend at least $5,000. Energy improvements include; new furnace, air conditioner, water heater, windows, exterior doors, insulation, and certain roofs.
The first $2,400 of unemployment benefits are not taxable on their Federal tax return.
The new home buyer credit was extended for those who had purchase agreements before May 1, 2010. The credit expires after September 30, 2010. A person could amend their 2009 tax return to get the credit early.
In 2010 there are advantages for converting a traditional IRA into a Roth IRA. Prior to 2010 those who had income of more than $100k could not convert to Roth IRAs. There is no income limit in 2010. The taxes on the converted IRAs do not have to be paid until the taxpayers file their 2011 and 2012 tax returns.
Estate Taxes – In 2010 there currently is no estate tax. Prior to 2010 when a person passed away the beneficiaries of the assets received a new basis. Instead of receiving an unlimited increase in basis (up to Fair Market Value) the beneficiaries for 2010 can increase their basis on assets by up to $1.3m. The beneficiaries can pick the assets they want the increase in basis. It is important to have a Financial Planner and CPA help with what should receive the increase in basis.
New Hire Tax Credit – Employers that hire workers that have not worked more than 40 hours over the prior 60 days will receive tax benefits. They do not have to pay the Employer portion of the Social Security Tax. They may also be eligible for an additional $1,000 tax credit.