| Federal Tax Law Changes Many of the tax breaks in recent tax-relief bills were designed to be phased in over a number of years, or are indexed to inflation. To help you determine how these tax laws affect your long-term plans, the following explains the changes scheduled to come into effect in 2010 through 2017. Estate Tax Repealed – The federal estate tax is scheduled to be eliminated for estates of individuals who die in 2010. It is expected that Congress will act to keep the tax alive. Roth IRA Conversions – Starting in 2010, individuals with more than $100,000 of modified Adjusted Gross Income are free to switch a traditional IRA to a Roth IRA. For conversions in 2010, taxpayers can spread the tax due over two years. Half the tax will be due in 2011, and the remaining half will be payable in 2012. Removing the limit on conversions effectively eliminates the income limit on contributions to Roth IRAs. A taxpayer with income too high to use a Roth will be able to contribute to a traditional IRA (which does not have income limits for contributions) and immediately convert to a Roth. Domestic Production Activities Deduction – In 2010, this deduction increases to nine percent of qualifying business net income. This deduction applies to businesses engaged in construction, engineering or architectural services, film production, or the lease, rental or sale of equipment you manufactured. However, the rate remains 6% for oil and gas companies. State and Local Sales Tax Deduction – The opportunity for itemizers to choose to deduct their state sales tax payments instead of deducting their state and local income taxes ends after 2009, unless Congress acts to extend it. Educators’ Deduction – This deduction for up to $250 of classroom supplies purchased by educators lapses after 2009, unless Congress acts to extend it. Nontaxable Combat Pay Allowed for Earned Income Tax Credit (EITC) – The election to include nontaxable combat pay in the calculation of earned income for the Earned Income Tax Credit is not available after 2009, unless Congress acts to extend it. Tuition and Fees Deduction – The deduction for up to $4,000 of college tuition and fees expires after 2009, unless Congress acts to extend it. Direct Donations of IRAs to Charity – Beginning in 2010, the opportunity for IRA owners age 70½ to directly donate part of their IRA balance to charity will disappear, unless Congress acts to extend it. Additional Standard Deduction for Property Taxes – Starting in 2010, non-itemizers will no longer be allowed to increase their standard deduction by up to $1,000 of property taxes paid, unless Congress acts to extend this break. Limits on Deducting Farm Losses – Beginning in 2010, the amount of farm losses you can enter to offset nonfarm income is capped at the greater of $300,000 or your net farm income over the past five years. But this limit will apply only if you get federal farm payments or Commodity Credit Corporation (CCC) loans. You can take suspended losses in later years. The caps will also apply to partners and S firm owners. Exemptions for the Alternative Minimum Tax – For 2010, the exemption levels drop to $45,000 for married filing jointly, $33,750 for singles and heads of household, and $22,500 for married couples filing separately. Congress is likely to act in 2009 to prevent this from happening. Otherwise, more than 20 million filers will be added to the AMT rolls. Partial Exclusion for Unemployment Benefits – For 2010, the first $2,400 of unemployment benefits you receive is no longer tax-free. Sales Tax Deduction for New Vehicles – Beginning in 2010, buyers of new vehicles no longer get a tax benefit for sales tax paid on new vehicles, unless they itemize and elect to deduct sales taxes instead of state income taxes. MilitaryConnection.com offers the most up-to-date military finance articles on the web. We constantly update our information to include the most relevant military news. As such, we will happily post your press releases, newsletters, professional conferences and more to increase visibility. There is something for everyone on MilitaryConnection.com. Everything here is free to users. From our extensive job board to our virtual job fair, we offer a multitude of resources for military and veteran job seekers. Surf our directory of employers that consists of over 30,000 employers, read the latest job tips and columns written by job experts or post a job yourself by signing up as an employer. Along with career and finance articles, MilitaryConnection.com offers a great amount of informational resources on education benefits for military members, veterans and their families, like the Post 9/11 GI Bill. Check out our scholarship directory for the latest scholarship opportunities available to military and veterans. For all your military needs, visit MilitaryConnection.com, your “go-to” site for everything military. |