Tax Changes for 2011

Originally posted on the Tree.com Money and Finance Channel

Here’s an overview of some of the top changes to consider when filing your 2010 return.

Deductions for Business and Medical Mileage

The deduction for operating your car for medical reasons is 7.5 cents less than last year, down to 16.5 cents a mile. Driving for charitable purposes is deductible at the same rates as last year, at 14 cents per mile.

Limits on Deductions for Property Damage or Loss Due to Theft

The loss amount must now exceed $100 for damaged or stolen property to be deductible, compared to $500 in 2009.

Taxes and Fees on New Motor Vehicle Purchases

If you bought a new car, light truck, motor home or motorcycle between February 17 and December 31 2009, you can deduct state, local, and excise taxes related to the purchase. If your state has no sales, you can deduct other taxes or fees generated from the purchase. This deduction is only good up to $49,500 of the purchase price. It is also phased out at certain levels of modified gross income, between $250,000 and $260,000 for joint filers and from $125,000 to $135,000 for other filers.

Deductions for Long-Term Care (LTC) Insurance Premiums

LTC insurance policy owner scan deduct more of their premiums for 2010. Those aged 51-60 can claim up to $1,230 in LTC insurance premiums, and the deductions increase progressively up to $4,110 for those 71 and over.

Other Important Elements

q  Current tax rates are retained for 2011 and 2012, with top rate of 35% on ordinary income, and 15% on qualified dividends and long-term capital gains.

q  Employees and self-employed workers receive a reduction of two percentage points in Social Security payroll tax in 2011.

q  The AMT exemption is kept near current levels and allows personal credits to offset the AMT.

q  Tax credits for working families under the American Recovery and Reinvestment Act of 2009 are retained.

q  Businesses can write off 100% of equipment and machinery purchases placed after September 8, 2010 through December 31, 2011.

q  The estate tax is reinstated for 2011 and 2012.

All in all, there were more than 20 pieces of legislation enacted, with over 570 changes to the Internal Revenue Code. The IRS has issued over 400 regulations, press releases, notices, revenue procedures and other forms of guidance. For all the latest information, visit the “Tax Changes for Individuals” section of the IRS website at http://www.irs.gov/formspubs/content/0,,id=178012,00.html.