Tax News
Call Accurate Tax @ 630-761-8020 or e-mail us and we will guide you through questions related to any of the new State and Federal tax laws.
Student Loan Interest Deduction
Rules in effect for 2010 are extended for two more years: The maximum amount of student loan interest that may be deducted is $2,500. The deduction is phased-out when modified adjusted gross income falls within the range of $120,000 - $150,000 for married filing joint, and $60,000 - $75,000 for all others except no deduction for Married Filing Separate.
American Opportunity Credit
- Maximum credit is $2,500 per eligible student per year (100% of the first $2,000 and 25% of the next $2,000 of eligible expenses).
- Eligible expenses include tuition and fees, plus course materials (books, supplies, and related equipment required for enrollment or attendance at an eligible educational institution).
- Allowable for the first 4 years of post-secondary education in a degree or certificate program.
- For tax years 2010, 2011 and 2012
- Phase out ranges: $160,000 - $180,000 for married filing joint, and $80,000 - $90,000 for all others except married filing separate who do not qualify.
Retirement Plans
In 2011, the combined contribution limit for traditional IRAs and Roth IRAs is $5,000 ($6,000 if 50 or older). IRA contributions must be made by the due date of the return, not including extensions, i.e., April 17, 2012. Salary deferral limits for 401(k), 403(b), SARSEP, 501(c)(18)(D), is $16,500 ($17,000 for 2012). Catch-up contributions $5,500.
Child Tax Credit
The child tax credit is extended through 2012 and remains at $1,000 per "qualifying child" under the age of 17. The credit is phased out beginning at $110,000 for Married Filing Joint, $75,000 for Single and Head of Household, and $55,000 for Married Filing Separate.
Charitable Contributions
Non-Cash Contributions: No charitable deduction is allowed for any contribution of clothing or a household item unless the clothing or household item is in good used condition, or better. Household items include furniture, furnishings, electronic, appliances, linens, and other similar items. Household items do not include food, paintings, antiques, jewelry and gems, or collections.
Cash Contributions: A charitable contribution deduction will be disallowed for any monetary contributions (cash, check, etc.) unless the donor maintains a record of the contribution. The record of the contribution must be in the form of a bank record, cancelled checks, or a written communication from the donee showing the name of the donee organization, the date of the contribution, and the amount of the contribution. This provision applies to any contribution of money, regardless of the amount.
Deduction for Mortgage Insurance Premium
Premiums paid or accrued by a taxpayer for qualified mortgage insurance in connection with acquisition indebtedness on a taxpayer’s primary or second home are deductible as residence interest.
- Only amounts paid on mortgage insurance contracts issued after 2006 qualify.
- Adjusted gross income no greater than $109,000 ($54,500 for MFS)
- For tax years 2010 and 2011
Mortgage Forgiveness Debt Relief Act of 2007
Homeowners may exclude from gross income "qualified principal residence indebtedness" cancelled during 2007-2012. Debt forgiveness on a second home, credit cards, or car loans does not qualify for this exclusion.
Capital Gains and Losses
In most cases, capital gains and losses must be reported on the new Form 8949, Sales and Other Dispositions of Capital Assets. The totals from that form are than carried to Schedule D. The 0% and 15% capital gain rates have been extended through 2012.
Dependent Care Credit
The maximum dependent care credit remains at $1,050 (35% x $3,000) for one qualifying individual, and $2,100 (35% x $6,000) for two or more through 2012.
Electronic Filing
Beginning January 1, 2012, tax return preparers who prepare 11 or more individual returns (including estate and trust returns) in a calendar year are required to electronically file those returns unless an exception applies. Form 8948, Preparer Explanation for Not Filing Electronically, lists the exceptions and is attached to the taxpayer’s paper filed return.
Tax Provisions Not Available in 2011:
First-Time Homebuyer Credit
Generally , principal residence purchases after April 30, 2010 no longer qualify for the first-time homebuyer credit. Exceptions are made for binding contracts and military personnel.
COBRA Subsidy
The 65% subsidy for COBRA health insurance coverage expired May 31, 2010.
Making Work Pay Credit
Expired December 31, 2010. With expiration of the credit there was a corresponding increase to the federal income tax withholding for 2011.
Disclaimer
All information on this page is provided as a brief summary and not considered binding authority.
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Tax Tip:
Contributions must be made to qualified organizations to be deductible. You cannot deduct contributions made to specific individuals, political organizations and candidates.