What will your taxes look like in 2011?

Tax Day 2010 has come and gone, much to the relief of many taxpayers. But it's never too early to start planning for the next tax year. Given all of the government's moves to stimulate the economy -- and the debt it has acquired doing so -- can you expect to pay more or less in taxes in 2011?

Here's a rundown of what's in store for the next tax year:
  1. More Making Work Pay Credit. Despite criticism heaped upon the IRS for its handling of the ill-designed Making Work Pay Credit, we're in for a second helping in 2010. The credit, aimed at the middle class as part of the American Recovery and Reinvestment Act, provides taxpayers with a refundable tax credit of up to $400 for working individuals and up to $800 for married couples filing joint returns, so long as they otherwise qualify. As before, most taxpayers will see an adjustment in their withholding amounts in their paychecks throughout the year, resulting in a small increase in take-home pay; taxpayers will actually claim the credit on their 2010 tax returns. Employees with more than one job or married couples who both work may want to try out the IRS's withholding calculator to see if any adjustments will be necessary on their form W-4.
  2. No deduction for sales tax on the purchase of a new vehicle. The tax provision that allowed taxpayers to take the itemized deduction or increase in standard deduction for sales tax on the purchase of a new motor vehicle has expired.
  3. No more state and local sales tax deduction. In 2009, taxpayers who itemized were able to deduct their state sales tax payments instead of deducting their state and local income taxes. This provision ended after December 31, 2009 -- although Congress could decide to extend it.
  4. Roth IRA conversions. In 2010, the rules governing who can invest in a Roth are a bit different. The change, which was signed into law as part of the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), allows anyone with an existing traditional IRA to convert to a Roth IRA -- regardless of their income -- for one year. The tax attributable for any such conversion will be paid in 2011 and 2012.The rules that otherwise govern establishing and making contributions to new Roth IRAs will not change.
  5. Homebuyer's Tax Credit payback begins. For 2009, the first-time home buyer's credit was a flat out credit -- no repayment required. However, the first iteration of the bill, which was part of the Housing and Economic Recovery Act of 2008, required the repayment of the credit over a period of 15 years. For taxpayers who claimed the credit in 2008, repayment begins with the filing of their 2010 tax return.
  6. No change in the gift tax exclusion. Inflation didn't move much at all from 2009 to 2010, which means that the annual gift-tax exclusion of $13,000 also won't change. For 2010, a U.S. taxpayer can give away $13,000 per person (to one person or a million different people -- the exclusion is unlimited) without any tax considerations.
  7. No federal estate tax. When the federal estate tax was repealed -- for one year -- under the Economic Growth and Tax Relief Reconciliation Act of 2001, it was widely believed that Congress would tweak the law to avoid the repeal before we actually made it to 2010. However, in a stunning show of inaction (some are calling it "Congressional malpractice"), Congress has simply chosen to do nothing. The result? No federal estate tax for 2010. But don't get too comfortable: In 2011, the federal estate tax is reinstated with a lower personal exemption ($1 million) and a higher tax rate (55%) than in 2009.
  8. Alternative Minimum Tax (AMT) exemption rollbacks. For 2009, the AMT exemption was $46,700 for individual taxpayers; $70,950 for married taxpayers filing jointly or for qualifying widow(er)s; and $35,475 if married filing separately. But for 2010, these exemption amounts will drop back to $33,750 for single taxpayers; $45,000 for married taxpayers filing jointly or for qualifying widower(s); and $22,500 if married filing separately in 2010. The scaled back exemption rate is expected to affect a whopping one in five taxpayers.
  9. No change in the Medicare tax (yet). The health care reform bill pushed through a number of tax provisions affecting employers and individual taxpayers. Most of the changes, however, including an additional Medicare tax on higher-income individuals, won't kick in until 2013. There is no change for 2010.
  10. Unemployment income tax breaks expire. For 2009, unemployed taxpayers who received related benefits could exclude up to $2,400 from their taxable income. Unless Congress votes to change the law for 2010, this tax benefit will no longer be available.
  11. Section 179 Expense Deduction. Most new business equipment can either be depreciated over its useful life or expensed immediately under Section 179 of the Internal Revenue Code; the latter tends to be the most popular among taxpayers. The deduction is calculated beginning in the taxable year in which the property is placed into service. For 2010, the maximum amount of equipment placed in service that businesses can expense was expected to drop to $135,000, down nearly 50% from the 2009 limit of $250,000 - but was given a last minute reprieve. The $250,000 limit remains, with limitations, for 2010 (but be forewarned: for 2011, it's slated to plummet).
Normally, this would be the point where I tell you to bookmark this post so you can refer to it during the tax year. But in a key election year, nothing is sacred. Expect to be surprised -- and keep checking back in with WalletPop to see what's developing in tax year 2010.

Driving for Lyft? Use This Tax Preparation Checklist

So, you decided to become your own boss (at least part-time) and start driving for a ride-sharing company like Lyft. Use the Lyft tax preparation checklist below to organize your income and deductions to make filing your taxes a breeze. Remember, not all items listed will apply to you, but it will give you a good idea on what you need to report as income and what you can claim as a deduction.

Read More

Brought to you by TurboTax.com

Video: The Alternative Minimum Tax (AMT) Explained

Originally created to make sure the wealthy paid taxes even after using tax breaks and loopholes, the Alternative Minimum Tax (AMT) has never been updated and continues to impact middle class Americans more and more each year as a result of inflation. To compensate for inflation, the AMT now includes an exemption amount. This exemption is indexed for inflation so it changes every year.

Read More

Brought to you by TurboTax.com

Energy Tax Credit: Which Home Improvements Qualify?

Taxpayers who upgrade their homes to make use of renewable energy may be eligible for a tax credit to offset some of the costs. As of the 2018 tax year, the federal government offers the Nonbusiness Energy Property Credit. The credits are good through 2019 and then are reduced each year through the end of 2021. Claim the credits by filing Form 5695 with your tax return.

Read More

Brought to you by TurboTax.com

Top 5 Reasons to File Your Taxes Early

Every April, many taxpayers wait until the last minute to file their federal income tax returns. Despite this tendency, there are many reasons to file your taxes early. If you will receive a refund, you may want to submit your return as quickly as possible. Additionally, there are benefits to filing early for those taxpayers who have a balance due.

Read More

Brought to you by TurboTax.com
Read Full Story
Your resource on tax filing
Tax season is here! Check out the Tax Center on AOL Finance for all the tips and tools you need to maximize your return.