Tax Credits

Several of the most popular tax credits have been extended or expanded including:

(1) The Child Tax Credit (up to $1,000 for each dependent child under age 17).

(2) The Earned Income Credit (which benefits low income people).

(3) The American Opportunity Tax Credit which benefits those attending undergraduate college. You can take a credit for up to $2,500 for qualified expenses, including books, school supplies and computer equipment. However, you must make less than $80,000 per year (single or head of household filers) or $160,000 (married filing joint) to claim the credit.

(4) Adoption Tax Credit. This provision was expanded to $13,170. It applies to any child adopted, not just a special needs child.

(5) The Child & Dependent Care Tax Credit. This also was extended. The amount is approximately 20% to 35% of day care expenses - up to $3,000 for one child and up to $6,000 for two or more children.

                        Miscellaneous

(6) School Teachers. If you teach, you can still write off $250 worth of school supply purchases. 

(7) Stock Sales. The long-term capital gains rate of 15% (0% for some taxpayers) will apply to stock sales through 2012.

(8) Married vs Single. The tax compromise extended the removal of the marriage tax penalty. That means taxpayers who are married filing jointly do not pay more tax than two taxpayers filing separately. 

Note:

Not all 2010 tax forms are currently available. Because the Tax Relief Act was not passed until mid-December, the IRS is making last-minute revisions to some of them. Taxpayers who are affected are those who: (a) itemize their deductions on Schedule A; (b) claim the tuition and fees or educator's expenses deductions on Form 1040 or Form 1040A.

The IRS has announced it will start processing those returns on February 14. However, if you e-file, you can file before Valentine's Day as most software manufacturers will hold you return until that date.

Keep checking at: www.irs.gov.

- Nancy Dunnan