Last year, millions of Americans received unemployment checks. Which makes for millions of people with some tax-free income.
See? Not all tax policies cause pain.
And that’s just one example of what’s new this year for taxpayers nationwide.
If you’re sending someone through college, bought a new home or a car last year, you may have some extra tax breaks waiting for you.
“For the most part, new legislation was aimed at helping to spur the economy and those (laws) are designed to be helpful and to put money in people’s pockets and give people credits,” said
For the 2010 tax season, here are a few things you need to know:
COLLEGE STUDENTS AND FAMILIES
The new American Opportunity Tax Credit is worth up to
This is more generous than the credits families had last year and it is available to more people in upper income brackets. Previously, families had to pick either an
First-time home buyers ? those didn’t own a home for the previous three years ? who bought a home after
Here’s one snag: The
And that requirement to show proof means anyone wanting this credit for 2009 must file a paper return including the statement. If you were planning to file electronically, claim this credit and get a quick refund, that won’t work.
Not a first-time buyer? Tax law still has something for you, too. If you have lived in your home five of the eight years before you bought a new home and you purchased it after
If you received a cash-for-clunkers payment last year it is not taxable. The government doesn’t get any of that
HOMEOWNERS IN TROUBLE
Ordinarily, if you get a debt forgiven ? such as your mortgage lender agrees to a short sale of your home ? that forgiven amount could become taxable. But not right now, in certain circumstances, on your residence.
If your lender forgives up to
The biggest benefit ? the
Your health insurance premiums, if you are paying for continuation of your coverage under COBRA, generally are not tax deductible, says CCH.
The only way they can be deducted is you can take them as part of a medical expense deduction and you itemize your taxes. If your premium cost plus other medical expenses exceed 7.5 percent of your adjusted gross income, that would qualify. But, because many unemployed are getting subsidies from their former employers to limit their costs, they may not have expenses high enough to qualify for this deduction.
ROTH IRA CONVERSIONS
2010 is the first year that anyone can convert an individual retirement account or IRA into a Roth IRA. The big difference is that withdrawing your money from a Roth IRA is tax-free. With a traditional IRA, you’ll pay federal income taxes on withdrawals.
Previously, you could not make this conversion if your modified adjusted gross income was
The snag to this item is the possibility of owing tax on the amount in your IRA that you convert. The twist is that if you convert during 2010 you can spread that tax bill over the tax years of 2011 and 2012.
Each one of these tax provisions have more details than can be explained here. So be sure to check for income limits and other details as you begin the annual tax calculations. The best place to go is IRS.gov and use the “Forms and Publications” tab to read the full rules.
SOURCE: Sun Sentinel. Distributed by McClatchy-Tribune Information Services (c) 2010.