Información en Español: Disposiciones del Acta del Cuidado de Salud de Bajo Precio

The Affordable Care Act was enacted on March 23, 2010. It contains some tax provisions that take effect this year and more that will be implemented during the next several years. The following is a list of provisions now in effect; additional information will be added to this page as it becomes available.

2010 Changes

The following changes to the AMT went into effect for 2010. For more information , see Form 6251, Alternative Minimum Tax--Individuals, and its instructions.

AMT exemption amount decreased. The AMT exemption amount has decreased to $33,750 ($45,000 if married filing jointly or qualifying widow(er); $22,500 if married filing separately).

Taxpayers must know their tentative minimum tax to claim certain credits. Taxpayers must complete Form 6251 through line 31 and attach it to their return to claim: the credit for child and dependent care expenses, the credit for the elderly or the disabled, the lifetime learning credit, the nonbusiness energy property credit, the mortgage interest credit, or the District of Columbia first-time homebuyer credit.

Caution. Congress is expected to consider legislation that would increase the AMT exemption amounts shown above and make it unnecessary for you to attach Form 6251 to your return to claim the credits listed above unless you actually owe AMT. If that legislation is enacted, we will update this page as soon as possible. You can also check the 2010 Form 6251 and the 2010 Instructions for Form 6251 once they become available.

Child's Investment Income

The amount of taxable investment income a child can have without it being subject to tax at the parent's rate.

Earned Income for Additional Child Tax Credit

For 2010, the amount your earned income must exceed to claim the additional child tax credit remains the same.

Expansion of Adoption Credit

For 2010, the maximum adoption credit and maximum exclusion from income under your employer’s adoption assistance program have increased. The credit is now refundable.

New Rules for Children of Divorced or Separated Parents

For tax years beginning after July 2, 2008 (the 2009 calendar year for most taxpayers), new rules apply to allow the custodial parent to revoke a release of claim to exemption that was previously released to the noncustodial parent on Form 8332 or similar form.

There are changes to the COBRA premium assistance provisions. To be eligible for COBRA premium assistance, you must be a qualified beneficiary as a result of an involuntary termination that occurred during the period beginning on September 1, 2008, and ending on May 31, 2010 (a 5 month extension of the original period). In addition, you are eligible for the premium assistance for a maximum period of 15 months (increased from 9 months) after the first month for which the premium assistance applies to you. There are also special rules for individuals who lost their health coverage because of a reduction in work hours. For more information on COBRA premium assistance, see Publication 502.

Generally, a personal casualty or theft loss must exceed $100 to be allowed for 2010. This is in addition to the 10% of AGI limit that generally applies to the net loss.

You can deduct state or local sales or excise taxes (or certain other taxes or fees in a state without a sales tax) paid in 2010 for the purchase of any new motor vehicle(s) after February 16, 2009, and before January 1, 2010.

This deduction can be used to increase the amount of your standard deduction, or you can take it as an itemized deduction.

To use the deduction to increase your standard deduction, use Schedule L (Form 1040A or 1040). To take the deduction as an itemized deduction, use Schedule A (Form 1040).

2010 Changes

The following paragraphs explain the changes to the credit for 2010. For details, see Publication 596, Earned Income Credit (EIC).

Amount of credit increased. The maximum amount of the credit has increased. The most you can get for 2010 is:

• $3,050 if you have one qualifying child,
• $5,036 if you have two qualifying children,
• $5,666 if you have three or more qualifying children, or
• $457 if you do not have a qualifying child.

Earned income amount increased. The maximum amount of income you can earn and still get the credit has increased for 2010. You may be able to take the credit if:

• You have three or more qualifying children and you earn less than $43,352 ($48,362 if married filing jointly),
• You have two qualifying children and you earn less than $40,363 ($45,373 is married filing jointly),
• You have one qualifying child and you earn less than $35,535 ($40,545 if married filing jointly), or
• You do not have a qualifying child and you earn less than $13,460 ($18,470 if married filing jointly).

Investment income amount. The maximum amount of investment income you can have and still get the credit is still $3,100 for 2010.

Advance payment of the credit. If you get the advance payments of the credit from your employer with your pay, the total advance payments you get during 2010 can be as much as $1,830.

Any economic recovery payment you receive during 2010 is not taxable. These $250 payments were made in 2010 to people who:

• Received social security benefits, supplemental security income (SSI), railroad retirement benefits, or veterans disability compensation or pension benefits in November 2008, December 2008, or January 2009,
• Live in a U.S. state, the District of Columbia, Puerto Rico, Guam, the U.S. Virgin Islands, American Samoa, or the Northern Mariana Islands and,
• Did not receive an economic recovery payment in 2009.

If you are married and you and your spouse both meet these requirements, each of you may get a $250 payment.

If you are entitled to a payment, you will get it automatically. You do not need to apply for it. However, any payment you receive will reduce your making work payment credit on Schedule M (Form 1040A or 1040).

Education Savings Bond Exclusion

An individual who redeems qualified U.S. saving Bonds to pay for higher education expenses may be able to exclude interest income from gross income.

2010

For 2010, the amount of your interest exclusion is phased out (gradually reduced) if your filing status is married filing jointly or qualifying widow(er) and your modified adjusted gross income (AGI) is between $105,100 and $135,100. You cannot take the exclusion if your modified AGI is $135,100 or more.

For all other filing statuses, your interest exclusion is phased out if your modified AGI is between $70,100 and $85,100. You cannot take the exclusion if your modified AGI is $85,100 or more. For more information, see chapter 10 in Publication 970, Tax Benefits for Education.

The definition of qualified higher education expenses for tax-free distributions from a qualified tuition program is expanded to include amounts paid in 2009 or 2010 for the purchase of computer software, any computer or related peripheral equipment, fiber optic cable related to computer use, and Internet access (including related services) that are to be used by the beneficiary and the beneficiary's family during any of the years the beneficiary is enrolled at an eligible educational institution.

For more information, including restrictions on qualifying software, see chapter 9 of the 2009 revision of Publication 970, Tax Benefits for Education.

For tax year 2010, the following changes have been made to the Hope and American opportunity credits.

• The Hope credit is not available for 2010.
• The American opportunity credit is available for 2010 and is unchanged from 2009.

For more information, see chapter 2 of Publication 970, Tax Benefits for Education.

2010 Changes

For 2010, you can no longer increase your standard deduction by:

• State or local real estate taxes,
• New motor vehicles taxes (for vehicles purchased in 2010), or
• Disaster losses (for disasters occurring in 2010).

But, you can increase your standard deduction in 2010 if you:

• Had a net disaster loss in 2010 occurring in 2008 or 2009 (from Form 4684, line 17), or
• Purchased a new motor vehicle after February 16, 2009, and before January 1, 2010, and paid the sales or excise taxes in 2010.

If you increase your standard deduction by either of these items, use Schedule L (Form 1040A or 1040) to figure your standard deduction.

For taxpayers using the head of household filing status, the basic standard deduction has increased to $8,400 for 2010. For other taxpayers, the basis standard deduction is the same as in 2009.

Final Year for Claiming the Credit

For most taxpayers, 2010 is the final year to claim the first-time homebuyer credit. In order to claim the credit for a main home purchased in 2010, taxpayers must have purchased their home:

1. Before May 1, 2010, or
2. After April 30, 2010, and before September 1, 2010, and entered into a binding contract before May 1, 2010, to purchase the property before July 1, 2010.

Additional Time to Purchase for Members of the Uniformed Services or Foreign Service and Employees of the Intelligence Community

Members of the uniformed services or Foreign Service and employees of the intelligence community serving outside the United States may have additional time to purchase a home and qualify for the credit. They may claim the credit for a main home purchased in the United States:

1. Before May 1, 2011, or
2. After April 30, 2011, and before July 1, 2011, and they entered into a binding contract before May 1, 2011, to purchase the property before July 1, 2011.

Repaying the Credit for a Home Purchased in 2008

If you claimed the credit for a home purchased in 2008 and you owned and used the home as your main home during all of 2010, you must begin repaying that credit with your 2010 tax return. The minimum payment is 1/15 of the original credit received.

For more details on repaying or claiming the credit visit the First-Time Homebuyer Credit page.

Gain from the sale or exchange of the main home is no longer excludable from income if allocable to periods of nonqualified use.

Generally, nonqualified use means any period after 2008 where neither you nor your spouse (or your former spouse) used the property as a main home (with certain exceptions).

A period of nonqualified use does not include:

1. Any portion of the 5-year period ending on the date of the sale or exchange that is after the last date you (or your spouse) use the property as a main home;
2. Any period (not to exceed an aggregate period of 10 years) during which you or your spouse is serving on qualified official extended duty:
• As a member of the uniformed services,
• As a member of the Foreign Service of the United States, or
• As an employee of the intelligence community; and
• Any other period of temporary absence (not to exceed an aggregate period of 2 years) due to change of employment, health conditions, or such other unforeseen circumstances as may be specified by the IRS.

To figure the portion of the gain that is allocated to the period of nonqualified use, multiply the gain by the following fraction:

total nonqualified use during period of ownership after 2008
total period of ownership

If you or your spouse is an employee, enrolled volunteer, or volunteer leader of the Peace Corp and you sell your main home, you may be able to exclude the gain from income even if you did not live in it for 2 years during the 5-year period ending on the date of sale. Generally, you can elect to have the 5-year test period for ownership and use suspended for up to 10 years during any period you or your spouse serve outside the United States (on qualified official extended duty if an employee). Similar benefits apply to members of the uniformed services, Foreign Service, or employees of the intelligence community. For more information, see Publication 523, Selling Your Home.

2010 Changes

The amount you can deduct for each exemption has not changed for 2010. It is still $3,650. But unlike 2009, when you would lose part of your deduction for personal exemptions if your adjusted gross income (AGI) was more than a certain amount, in 2010 you will not lose any part of your deduction for personal exemptions, regardless of the amount of your AGI.

2010

Nonbusiness energy property credit. This credit, which expired after 2007, has been reinstated. You may be able to claim a nonbusiness energy property credit of 30% of the cost of certain energy-efficient property or improvements you placed in service in 2010. This property can include high-efficiency heat pumps, air conditioners, and water heaters. It also may include energy-efficient windows, doors, insulation materials, and certain roofs. The credit has been expanded to include certain asphalt roofs and stoves that burn biomass fuel.

Limitation. The total amount of credit you can claim in 2009 and 2010 is limited to $1,500.

Residential energy efficient property credit. Beginning in 2009, there is no limitation on the credit amount for qualified solar electric property costs, qualified solar water heating property costs, qualified small wind energy property costs, and qualified geothermal heat pump property costs. The limitation on the credit amount for qualified fuel cell property costs remains the same.

If you retire from the armed services based on years of service and are later given a retroactive service-connected disability rating by the VA, your retirement pay for the retroactive period is excluded from income up to the amount of VA disability benefits you would have been entitled to receive. You can claim a refund of any tax paid on the excludable amount (subject to the statute of limitations) by filing an amended return on Form 1040X for each previous year during the retroactive period.

Generally, under the statute of limitations a claim for credit or refund must be filed within 3 years from the time a return was filed or 2 years from the time the tax was paid, whichever period expires later. However, if you receive a retroactive service-connected disability rating determination, the statute of limitations is extended for 1 year beginning on the date of the determination. The extension applies to claims for credit or refund filed after June 17, 2008, and does not apply to any tax year that began more than 5 years before the date of the determination.

Example.You retired in 2005 and receive a pension based on your years of service. On August 6, 2010, you receive a determination of service-connected disability retroactive to 2005. Generally, you could claim a refund for the taxes paid on your pension for 2007, 2008, and 2009. However, under the special limitation period, you can also file a claim for 2006 as long as you file the claim by August 5, 2011. You cannot file a claim for 2005 because that tax year began on January 1, 2005, which is more than 5 years before date of the determination.

2010

For 2010, the standard mileage rate for the cost of operating your car for business use is 50 cents per mile.

Car expenses and use of the standard mileage rate are explained in chapter 4 of Publication 463, Travel, Entertainment, Gift, and Car Expenses.

Medical- and move-related mileage. For 2010, the standard mileage rate for the cost of operating your car for medical reasons or as part of a deductible move is 16.5 cents per mile.

See Transportation under What Medical Expenses Are Includable in Publication 502 or Travel by car under Deductible Moving Expenses in Publication 521, Moving Expenses..

Charitable-related mileage. For 2010, the standard mileage rate for the cost of operating your car for charitable purposes remains 14 cents per mile.

Credit for Employer Differential Wage Payments

Eligible small business employers may be able to claim a credit for differential wage payments made to qualified employees after 2008 and before 2010. The credit is 20% of the first $20,000 of qualified differential wage payments made to each qualified employee. For more information, see Form 8932, Credit for Employer Differential Wage Payments.

Penalty for Late Filing of a Partnership Return

For tax years beginning in 2009, the late filing penalty for a partnership return is $89 for each month or part of a month (up to 12 months) the return is late (or does not contain the required information) multiplied by the total number of persons who were partners in the partnership during any part of the partnership's tax year. No penalty will be imposed if the partnership shows that the late filing was due to reasonable cause.

For tax years beginning after 2009, the late filing penalty for a partnership return is $195 for each month or part of a month (up to 12 months) the return is late (or does not contain the required information) multiplied by the total number of persons who were partners in the partnership during any part of the partnership's tax year. No penalty will be imposed if the partnership shows that the late filing was due to reasonable cause.

Penalty for Late Filing of an S Corporation Return

For tax years beginning after 2009, the late filing penalty for an S corporation return is $195 for each month or part of a month (up to 12 months) the return is late (or does not contain the required information) multiplied by the total number of persons who were shareholders in the corporation during any part of the corporation's tax year. No penalty will be imposed if the corporation shows that the late filing was due to reasonable cause.

Work Opportunity Credit

Two new targeted groups have been added to the work opportunity credit:

• Unemployed veterans, and
• Disconnected youth.

An unemployed veteran is a veteran hired after 2008 and before 2011 who:

• Has been discharged or released from active duty in the U.S. Armed Forces at any time during the 5-year period ending on the hiring date, and
• Received unemployment compensation under state or federal law for at least 4 weeks during the 1-year period ending on the hiring date.

A disconnected youth is an individual hired after 2008 and before 2011 who:

• Is at least age 16 but not yet age 25 on the hiring date;
• During the past 6 months, has not attended or has not regularly attended any secondary, technical, or post-secondary school for more than an average of 10 hours per week, not counting periods during which the school was closed for scheduled vacation;
• During each consecutive 3-month period within the past 6 months, was not employed or was employed and earned an amount less than he or she would have earned working for the applicable minimum wage 30 hours every week during the 3-month period; and
• Does not have a certificate of graduation from a secondary school or a General Education Development (GED) certificate or has a certificate that was awarded at least 6 months ago and he or she has not held a job (other than occasionally) or been admitted to a technical or post-secondary school since receiving the certificate.

Social Security and Medicare Taxes

2010 Changes

The maximum amount of wages subject to the social security tax for 2010 is $106,800. There is no limit on the amount of wages subject to the Medicare tax.

2011 Changes

The maximum amount of wages subject to the social security tax for 2011 is $106,800. There is no limit on the amount of wages subject to the Medicare tax.

Self-Employment Tax

2010 Changes

Maximum amount subject to tax. The maximum amount of net earnings subject to the social security part of the self-employment tax for tax years beginning in 2010 remains $106,800. All net earnings of at least $400 are subject to the Medicare part of the tax.

Optional methods to figure net earnings. For tax years beginning in 2010, the dollar thresholds for using the optional methods to figure net earnings from self-employment have increased. You may use the farm optional method to figure your net earnings from farm self-employment if your gross farm income was $6,720 or less or your net farm profits were less than $4,851. The nonfarm optional method may be used to figure your net earnings from nonfarm self-employment if your net nonfarm profits were less than $4,851 and also less than 72.189% of your gross nonfarm income.

In 2010, the maximum social security coverage under the optional methods is four credits, the equivalent of $4,480 of net earnings from self-employment.

Ten Tips for Taxpayers Making Charitable Donations

IRS Summertime Tax Tip 2010-21

Did you make a donation to a charity this year? If so, you may be able to take a deduction for it on your 2010 tax return.

Here are the top 10 things the IRS wants every taxpayer to know before deducting charitable donations.

1. Charitable contributions must be made to qualified organizations to be deductible. You can ask any organization whether it is a qualified organization and most will be able to tell you. You can also check IRS Publication 78, Cumulative List of Organizations, which lists most qualified organizations. IRS Publication 78 is available at IRS.gov.
2. Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A.
3. You generally can deduct your cash contributions and the fair market value of most property you donate to a qualified organization. Special rules apply to several types of donated property, including clothing or household items, cars and boats.
4. If your contribution entitles you to receive merchandise, goods, or services in return – such as admission to a charity banquet or sporting event – you can deduct only the amount that exceeds the fair market value of the benefit received.
5. Be sure to keep good records of any contribution you make, regardless of the amount. For any contribution made in cash, you must maintain a record of the contribution such as a bank record – including a cancelled check or a bank or credit card statement – a written record from the charity containing the date and amount of the contribution and the name of the organization, or a payroll deduction record.
6. Only contributions actually made during the tax year are deductible. For example, if you pledged $500 in September but paid the charity only $200 by Dec. 31, your deduction would be $200.
7. Include credit card charges and payments by check in the year they are given to the charity, even though you may not pay the credit card bill or have your bank account debited until the next year.
8. For any cash or property contribution of $250 or more, you must have written acknowledgment from the organization to substantiate your donation. This written proof must include the amount of cash or a description of any property you contributed, and whether the organization provided any goods or services in exchange for the gift, including a good faith estimate of the value of the goods or services you received.
9. To deduct charitable contributions of items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions, and attached the form to your return.
10. An appraisal generally must be obtained if you claim a deduction for a contribution of noncash property worth more than $5,000. In that case, you must also fill out Section B of Form 8283 and attach the form to your return.