HOUSTON CPA

Payroll Taxes have dropped as well with Congress giving taxpayers a 6.2% credit up to $400 for single taxpayers and $800 for those filing jointly. Small business owners can take their credit as a deduction of their estimated tax payment.

Taxes in the 10, 15, 25, 28, 33 and 35% tax brackets kick in 4% higher this year giving taxpayers a small break.

Each personal exemption you claim is worth $3650. Same as 2009.

No changes in the standard deduction for joint filers as it remains at $11,400. But single taxpayers get a $250 increase and heads of household get a $50 increase in the standard deduction.

Effective January 1, 2010, individuals will no longer be able to take the itemized deduction or increase in standard deduction for sales tax on the purchase of a new motor vehicle.

Individuals will no longer be able to take an itemized deduction for state and local sales tax.

Teachers will no longer be allowed to deduct out of pocket expenses incurred for school supplies. In the past, a deduction from adjusted gross income of up to $250 was allowed.

There are no income limits in 2010 for individuals that would like to convert a traditional IRA to a Roth IRA. Also, for any conversions in 2010, the tax will be paid in 2011 and 2012.

In 2010, there will be no phase out of itemized deductions or personal exemptions. This change will greatly benefit high income earners.

In 2009, those receiving unemployment benefits can exclude up to $2,400 from their taxable income. This tax benefit is no longer be available in 2010.

Charitable distributions made directly from an IRA account to a qualified charity will no longer be excluded from your income

The AMT exemption is scheduled to decrease to $33,750 for single filers and to $45,000 for those filing a married joint return.

There is no change in the maximum contribution and individual can make to a 401(k) plan in 2010. This remains at $16,500. The catch up contribution of $5,500 for individuals age 50 + also remains the same.

The updated mileage reimbursement rates effective for January 1, 2010 are $0.50, $0.165 and $0.14 for miles incurred for business purposes, medical purposes and charitable purposes, respectively. These rates just changed yesterday.

If you got on the home buyers tax credit gravy train back in 2008, you are required to start paying the credit back in 2010. If you purchased a primary residence in 2010 you might be eligible for the First Time Homeowners Tax Credit or the Existing Homeowners Tax Credit.

The First Time Homeowners Credit is up to $8,000. If you closed on a home before September 30, 2010 and have never owned a home in the US you are eligible for 10% of the purchase price of the home up to $8,000 as a tax credit. To the extent that it exceeds your tax liability you could receive some or all the credit in cash. If you are an existing homeowner and have used your home as a primary residence for five of the last eight years you could be eligible for a credit of 10% of the purchase price and again are eligible to receive the portion over and above your tax liability in cash. You must have signed a binding contract to purchase by April 30, 2010 and closed no later then September 30, 2010.

Employers can now pay up to $230 tax free to employees for parking or transits fees.

The Hope Credit for college tuition is replaced with the American Opportunity Tax Credit, which allows for a $2,500 per year tax credit for eligible students for four years. It now includes book fees. It starts to phase out for single taxpayers at $80,000 and joint filers at $160,000. To the extent that the credit exceeds your tax liability you are entitled to a 40% claim refund for the difference.