Key Changes in Tax Laws for 2010 Individual Returns

New tax laws could affect your 2010 tax year return. Here's what you need to know.

Every year, taxpayers and tax professionals dust off their magnifying glasses and try to understand what's new in federal and state tax law. 2011 is no different. So, as you get your tax returns ready for the 2010 tax year, what changes should you pay particular attention to? This article looks at the key federal tax law changes that affect your filing in April 2011, according to the IRS. And don't forget to check for new state tax laws that could affect you too. A good place to start is the website for your state's tax agency. (For everything you need to know to get your personal tax return together this year, check out Nolo's Personal Income Taxes section. Business owners and self-employed taxpayers can get tips on 2011 tax law changes in Nolo's article 2011 Tax Laws: What's New for Businesses and the Self-Employed.)

2011 IRS Filing Deadline Is April 18 (Not April 15)

This year you'll have until April 18 to file your federal income tax return with the IRS (instead of the typical April 15 deadline). That's because Emancipation Day -- a holiday observed in Washington, D.C. -- falls on April 15 this year, which is a Friday. And since any D.C. holiday affects tax deadlines the same way that a federal holiday would, this year's deadline for filing your federal returns is moved to Monday, April 18.

Roth IRA Conversions: More Taxpayers Qualify

Income limits no longer apply to rollovers or conversions to Roth IRAs from other retirement plans. In the past, only taxpayers with modified adjusted gross income of $100,000 or less were eligible, and a married person filing a separate return who lived with his or her spouse at any time during the year was barred from Roth IRA rollovers or conversions, regardless of income.

For 2010 rollovers and conversions only, half of the resulting income must be included as income in tax year 2011 and the other half in 2012, unless the taxpayer chooses to include all of it as income in 2010. In all situations, taxpayers must report any 2010 conversion on Form 8606 for tax year 2010. These rules do not apply to rollovers from another Roth IRA or from a designated Roth account.

Did You Claim the First-Time Homebuyer Credit in 2008?

Taxpayers who claimed the first-time homebuyer credit for a home bought in 2008 must generally begin repaying it on the 2010 return. In most cases, the credit must be repaid over a 15-year period. Many of those affected by this requirement received reminder letters from the IRS.

A repayment requirement also applies to a taxpayer who claimed the credit on either a 2008 or 2009 return and then sold or stopped using the home as a main residence in 2010.

The first-time homebuyer credit hasn't gone away completely. Certain members of the armed forces and some other taxpayers still have time to buy a home and use the credit.

Alternative Minimum Tax Exemption Increased

For tax-year 2010, the alternative minimum tax exemption increases to the following levels:

  • $72,450 for a married couple filing a joint return and qualifying widows and widowers (up from $70,950 in 2009).
  • $36,225 for a married person filing separately (up from $35,475).
  • $47,450 for singles and heads of household (up from $46,700).

Special Charitable Contribution Tax Breaks for Certain IRA Owners

This provision, now available through the end of 2011, offers older owners of individual retirement accounts (IRAs) a different way to give to charity. An IRA owner age 70

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