Important Tax Law Changes for 2010

(Source: http://www.irs.gov/newsroom/article/0,,id=120227,00.html 02-11-2011)


Summary:

Before you complete your 2010 federal income tax return, you should be aware of many important changes. IRS wants you to keep in mind about the following changes.

Health Insurance Deduction Reduces Self Employment Tax In 2010
In 2010, besides on Form 1040 Line 29, eligible taxpayers can also enter this amount on Schedule SE Line 3 to reduce net earnings from self-employmnet subject to the 15.3 percent social security self-employment tax.

Premiums paid for health insurance
The taxpayer, spouse and dependents and an adult chile under age 27 at the end of the year, for the time period beginning on or after March 30, 2010 are covering.  Even if the child is not the taxpayer’s dependent., it is covering as well. The taxpayer cannot be eligible to participate in an employer-sponsored health plan. As before, the insurance plan must be set up under the taxpayer’s business.

First-time homebuyer credit
1. Entered into a binding contract to buy — a principal residence on or before April 30, 2010.
2. You must have closed or gone to settlement on the home on or before Sept. 30, 2010.
3. Taxpayer must file 2010 tax return on paper basis instead of electronice basis. 
4. Form 5405 is needed to attach. First-Time Homebuyer Credit and Repayment of the Credit, and a properly executed copy of a settlement statement used to complete the purchase.
5. 2008 first-time homebuyer credit must begin to repay on the 2010 return if taxpayers sold or stopped using the home as a main home.  In ost cases, the credit must be repaid over a 15-year period. Use Form 5405 to report the repayment.

Standard Mileage Rates
1. 50 cents / per mile - Business use of a car, van, pick-up or panel truckdriven.
2. 16.5 cents / per mile - Cost of operating a vehicle for medical reasons or as part of a deductible move.
3. 14 Cents / per mile - Using a car to provide services to charitable organizations set by law.

Several tax breaks that expired at the end of 2009 were renewed and can be claimed on 2010 returns. They include:

1. State and local general sales tax deduction, primarily benefiting people living in areas without state and local income taxes. Claim on Schedule A, Line 5.
2. Higher education tuition and fees deduction benefiting parents and students. Claim on Form 8917.
3. Educator expense deduction for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250, Claim on Form 1040, Line 23 or Form 1040A Line 16.
4. District of Columbia first-time homebuyer credit. Claim on Form 8859