December 21, 2010

New on the 2010 Form 1040

This post summarizes important tax changes that took effect in 2010. The changes are discussed in greater detail here.

Changes are also discussed at Click on Forms and Publications and then on Highlights of Recent Tax Changes.

Due date of return. File Form 1040 by April 18, 2011. The due date is April 18, instead of April 15, because of the Emancipation Day holiday in the District of Columbia — even if you do not live in the District of Columbia.

Limits on personal exemptions and overall itemized deductions ended. For 2010, you will no longer lose part of your deduction for personal exemptions and itemized deductions, regardless of the amount of your adjusted gross income (AGI).

Self-employed health insurance deduction. Effective March 30, 2010, if you were self-employed and paid for health insurance.

Standard deduction increased. The standard deduction for some taxpayers who do not itemize their deductions on Schedule A of Form 1040 is higher in 2010 than it was in 2009. The amount depends on your filing status. In addition to the annual increase for some taxpayers due to inflation adjustments, your 2010 standard deduction is also increased by:
  • Any state or local sales or excise taxes you paid in 2010 on the purchase of a new motor vehicle after February 16, 2009, and before January 1, 2010, and
  • Any net disaster loss you had in 2010 because of a disaster that was declared a federal disaster after 2007 and that occurred before 2010.

You can use the 2010 Standard Deduction Worksheet in chapter 20 of publication 17 to figure your standard deduction. But to increase your standard deduction by taxes paid on the purchase of a new motor vehicle or a net disaster loss, you must use Schedule L (Form 1040A or 1040) and attach it to your return.
Congress was considering legislation that would provide an increased standard deduction for real estate taxes or for a net disaster loss from a disaster occurring in 2010. To find out if this legislation was enacted, and for more details, see Schedule L (Form 1040A or 1040) or check

Roth IRAs. Beginning in 2010, you can make a qualified rollover contribution to a Roth IRA regardless of the amount of your modified AGI.Also, half of any income that results from a rollover or conversion to a Roth IRA from another retirement plan in 2010 is included in income in 2011, and the other half in 2012, unless you elect to include all of it in 2010. See Publication 17 chapters 10 and 17.

Standard mileage rates. For 2010, the standard mileage rate for the cost of operating your car for business use is 50 cents a mile. See chapter 26. For 2010, the standard mileage rate for the cost of operating your car for medical reasons is 16½ cents a mile. See chapter 21. For 2010, the standard mileage rate for the cost of operating your car for determining moving expenses is 16½ cents a mile. See Publication 521, Moving Expenses.

Personal casualty and theft loss limit. Each personal casualty or theft loss is limited to the excess of the loss over $100 (instead of the $500 limit that applied for 2009). In addition, the 10%-of-AGI limit generally continues to apply to the net loss. See Publication 17 chapter 25. To find out if legislation was enacted to increase limits, see the 2010 Instructions for Form 4684.

Expired tax benefits. The following tax benefits have expired and are not available for 2010:
  • Deduction for educator expenses in figuring AGI.
  • Tuition and fees deduction in figuring AGI.
  • Deduction for state and local general sales taxes.
  • The exclusion from income of up to $2,400 in unemployment compensation. All unemployment compensation you received in 2010 generally is taxable.
  • The exclusion from income of qualified charitable distributions made from IRA accounts.
  • Government retiree credit.
  • Extra $3,000 IRA deduction for employees of bankrupt companies.
  • Certain tax benefits for Midwestern disaster areas, including increased Hope and lifetime learning credits and the additional exemption amount if you provide housing for a person displaced by the Midwestern storms, tornadoes, or flooding.
  • Credit to holders of clean renewable energy bonds issued after 2009.
  • The allowance of certain credits against the AMT, credit for nonbusiness energy property, credit for the elderly or the disabled, lifetime learning credit. For most people, these credits are now limited to your regular tax minus any tentative minimum tax.
 For more information....