Tax Law Changes for Your 2010 Tax Filing: Understanding What’s New and How It Might Affect You

Because of a quirk in the calendar, tax day this year falls on Monday, April 18. Even with the three day bonus from the normal deadline, the dreaded day is fast approaching. If you’re considering saving a little cash by doing your taxes yourself this year, there are some important tax law changes you should be aware of before sitting down to the kitchen table with your calculator and digging in to those tax documents and forms.

One of the most important cautionary notes for consumers preparing their own taxes is not to simply assume that you can take the same deductions or credits this year as you did in previous years. Tax laws are complicated enough without Congress changing them from year to year, and 2010 was no exception. Congress even waited until the week before Christmas 2010 to pass some of the legislation that may directly affect your 2010 tax return. As a result, it’s important to keep up on the very latest. The following summary is meant to provide a brief overview of some of the 2010 tax law changes most relevant to individuals.

 

What’s New for Your 2010 Tax Return

Efficient Energy Credits for Home Improvements: Congress has reinstated the “nonbusiness energy property credit” which had been expired since 2007. If you made any energy-efficient improvements to your property in 2010, including installing a high-efficiency heat pump, air conditioner, windows, or insulation, you may be eligible to claim a tax credit of up to 30% of the cost of such improvements, with an overall cap of $1,500. Additionally, homeowners who have installed solar or wind-powered energy-producers on their homes may be eligible for an unlimited tax credit, dating back to 2009.

First-Time Homebuyer Credit: Congress extended the credit for first-time homebuyers into the first part of 2010, now allowing anyone who purchased a home before May 1, 2010 to claim the credit. You may also still be eligible if you purchased a home after that deadline but before September 1, 2010, as long as you entered a binding contract to buy the home before May 1 to purchase the property before July 1. Additionally, for anyone who claimed the first-time homebuyer credit back in 2008, it’s unfortunately time to start paying back this credit. The minimum repayment required is 1/15 of the original credit received. For more information, see the IRS page on the first-time homebuyer credit.

Standard Mileage Rate: If you use your car for business purposes and claim it on your tax return, know that the standard mileage rate for the cost of operating your car for business in 2010 was decreased to 50 cents per mile. The rate for medical care and moving purposes went down as well: for 2010 tax returns it now rests at 16.5 cents per mile. The rate for charitable purposes, on the other hand, held steady at 14 cents per mile.

Adoption Credit: If you know anyone who adopted a child in 2010, the new health care reform bill should offer their family a nice financial bonus thanks to their new addition. The adoption credit for 2010 is $13,170, and the best part is that it is refundable, which means many adopting families should see a very sizeable refund.

If you have questions about filing your 2010 tax return, the IRS website can be a helpful place to start. As always, if your tax situation is more complicated, talking to a tax attorney may be in your best interest. In any event, good luck with those tax returns this year, and remember to take full advantage of those extra three days before the deadline!