Chapter 4

Chapter 4 - 59 Chapter 4 Gross Income Exclusions and...

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© 2010 CCH. All Rights Reserved. Chapter 4 59 Chapter 4 Gross Income Exclusions and Deductions for AGI Highlights of 2010 Tax Changes In f ation adjustments increased the exclusion for foreign earned income to $91,500 in 2010 (up from $91,400 in 2009). The annual pay threshold for key employees increased to $160,000 in 2010 (same as in 2009). In 2010, employees can exclude up to $13,170 they are reimbursed for quali F ed adoption costs under an adoption assistance program at their work (up from $12,150 in 2009). In 2010, the exclusion begins to be phased out when an employee’s AGI reaches $182,520 (up from $182,180 in 2009). In 2010, employees can exclude up to $230 each month (same as in 2009) for employer-provided quali F ed parking and transportation. The exclusion for interest income from Series EE and I government bonds when the proceeds are used to pay for quali F ed education is phased out in 2010 when AGI exceeds $70,100 for unmarried taxpayers ($105,100 for MFJ). These in f ation-adjusted amounts were increased from the $69,950 and $104,900 thresholds that applied in 2009. The maximum contribution amounts to a Roth IRA remained the same for 2010 as they were in 2009 ($5,000 plus $1,000 for taxpayers age 50 and older). The AGI threshold where the amount of the maximum contribution begins to be phased out stayed at $105,000 for unmarried taxpayers, but increased to $167,000 for taxpayers F ling MFJ (up from $166,000 in 2009). The AGI threshold for phase-out for MFS taxpayers remains at $0. At the time the book went to press, the educators expense deduction and the tuition and fees deduction had not been extended. The maximum that taxpayers can contribute to individual coverage in a health savings account (HSA) for 2010 is $3,050. The maximum contribution for family coverage is $6,150. In 2010, a high-deductible health plan for individual coverage is one that has at least a $1,200 deductible ($2,400 for family coverage). The mileage deduction for moving is $.165 a mile in 2010 (down from $.24 a mile in 2009). The maximum contribution amounts to a traditional IRA remained the same for 2010 as in 2009 ($5,000 plus $1,000 for taxpayers age 50 and older). The maximum contribution continues to be phased out when AGI exceeds a certain threshold. In 2010, that threshold remains at $0 for MFS taxpayers who live together at some point during the year. It remained at $89,000 for taxpayers F ling MFJ when the spouse participates in an employer-sponsored retirement plan at work. The 2010 AGI thresholds for all other taxpayers increased to: $56,000 for unmarried taxpayers and taxpayers F ling MFS who did not live together during the year (up from $55,000 in 2009). $167,000 for a nonparticipating spouse who F les a joint return with a spouse who participates in a plan at work (up from $166,000 in 2009). Starting in 2010, taxpayers can rollover amounts from their traditional IRAs into a Roth IRA. When done properly, no penalty will result. However, any earnings and deductible contributions would be included in gross income. In 2010, taxpayers can either spread the taxable amounts over 2011 and 2012 (½ in each year), or elect to tax the full amount in 2010.
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This note was uploaded on 01/14/2012 for the course ECON 121 taught by Professor Mcdevitt during the Winter '10 term at UCLA.

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Chapter 4 - 59 Chapter 4 Gross Income Exclusions and...

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