Be Aware of These 5 Tax Law Changes for 2010
Are you getting excited about filing your taxes in a few months? Aren't we all? As if having to file our taxes wasn't bad enough, the IRS keeps making lots of tax law changes to keep us on our toes. These are a just a few of the changes that will affect our 2010 tax returns.
1. The estate tax is gone for 2010, but set to come back in 2011
At the moment the estate tax is at 0% for the rest of 2010, but unless congress makes some decisions before year end, the estate tax will return in 2011 (likely) back to the 2009 levels.
2. The gift tax rate changes to 35% for 2010 from 45%.
If you don't end up gifting over $1 million during your lifetime, this doesn't affect you. But, if you do, the gift tax for 2010 is sitting at 35% for anything above the lifetime exception of $1 million.
3. Roth IRA conversions with no income limits.This is one of best things going in 2010 – anyone can convert a traditional IRA to a Roth IRA and they have the option of paying the resulting taxes from the conversion over the next two years. While there are still limits preventing some taxpayers from contributing to a Roth, financial planner Jay Peroni reminds readers that, "there are still income limits preventing certain taxpayers from actively contributing to a Roth IRA, but there is no rule stopping you from making an IRA contribution in 2010 and then subsequently converting that to a Roth."
4. Changes to business mileage deduction ratesIn 2009, the IRS gave us a 55 cents per mile deduction when we used our personal vehicles for business purposes. In 2010 it has been lowered to 50 cents a mile, and in 2011 it looks like the standard business mileage rates will increase to 51 cents per mile.
5. No tax breaks for unemployment benefits in 2010Last year the IRS allowed those receiving unemployment benefits to exclude up to $2,400 of them. In 2010 the unemployment tax breaks have been removed.
As with most things tax-related, changes occur often, so to be best prepared for tax time consult with your tax advisor.