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2009 Tax Changes: Estate Tax Exemption. In 2009, the $2,000,000 federal estate tax exemption rises to $3,500,000. Credit for Residential Energy-efficient Property. The $2,000 maximum credit for the installation of solar water heating equipment, photovoltaic or fuel cell equipment in your primary residence or a second home expires after 2008. 2010 Tax Changes: Estate Tax Repealed. The federal estate tax is eliminated for estates of individuals dying in 2010. Roth IRA Conversions. Starting in 2010, individuals with more than $100,000 of modified adjusted gross income are free to switch an IRA to a Roth IRA. For conversions in 2010, taxpayers can spread the tax due over two years. Half the tax will be due in 2011, and the remaining half will be payable in 2012. Domestic Production Activities Deduction. In 2010, this deduction increases to nine percent of qualifying business net income. This deduction applies to businesses engaged in construction, engineering or architectural services, film production, or the lease, rental or sale of equipment you manufactured. Tax Relief for Taxpayers Who Lose Their Homes Due to Foreclosure Expires. Starting in 2010, debt forgiven in connection with the foreclosure of a principal residence will once again be considered taxable income (unless you are in bankruptcy or insolvent). 2011 Tax Changes: Estate Tax Revived. For individuals dying after 2010, the federal estate tax returns with a $1,000,000 exemption and a 50 percent maximum rate. Increase in Capital Gains and Dividend Tax Rates. The tax rate reductions for long-term capital gains and dividends expire this year. In 2011, the maximum long-term capital gains tax rate goes back up to 20 percent from 15 percent. A lower 10 percent tax rate is used by individuals to the extent that they are in the 10 percent and 15 percent tax brackets. Their long-term capital gains had been tax free since 2008. In 2011, dividend income (other than capital gain distributions from mutual funds) is taxed as ordinary income at the taxpayer's highest marginal tax rate. Child Tax Credit. The credit of $1,000 per eligible child reverts to $500 after 2010. Decreased Section 179 Expense Deduction. Taxpayers who purchase qualifying business property may elect to deduct the cost of the property (new or used) in the year that it is placed in service. This is referred to as a Section 179 deduction. In the tax years through 2010, the maximum amount of property that may be taken as a Section 179 deduction is $125,000, as indexed for inflation. In 2011 and future years, the maximum deduction drops to $25,000. Mortgage Insurance Premiums. The special itemized deduction for mortgage insurance premiums paid on mortgages taken out after 2006 expires after 2010 |
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