Tax Updates

Make a Tax Payment:

TAX		Taxable	Income
TABLE	Tax Rate	Over	Up to	PERSONAL EXEMPTION:	$3,650
	10%	$-	$16,750
Married	15%	$16,750	$68,000	STANDARD DEDUCTIONS:
Filing	25%	$68,000	$137,300	Married Filing Joint	$11,400
Joint	28%	$137,300	$209,250	Single and Married Filing Separately	$5,700
	33%	$209,250	$373,650	Head of Household	$8,400
	35%	$373,650	no limit
	Tax Rate	Over	Up to	RETIREMENT PLAN CONTRIBUTIONS:
	10%	$-	$8,375
	15%	$8,375	$34,000	Traditional and Roth IRA Contribution	$5,000
Single	25%	$34,000	$82,400	Catch Up Contribution for Age 50 and Older	$1,000
	28%	$82,400	$171,850
	33%	$171,850	$373,650	Simple IRA	$11,500
	35%	$373,650	no limit	Catch Up Contribution for Age 50 and Older	$2,500
	Tax Rate	Over	Up to
	10%	$-	$11,950	SEP IRA	$49,000
	15%	$11,950	$45,550	(Maximum Compensation Considered)	$245,000
Head	25%	$45,550	$117,650
Of	28%	$117,650	$190,550	401K / 403(b) / Section 457 Plans	$16,500
Household	33%	$190,550	$373,650	Catch Up Contribution for Age 50 and Older	$5,500
	35%	$373,650	no limit



Health Savings Account Contribution Limits:
Single Coverage (minimum deductible-$1,200):	$3,050
Family Coverage (minimum deductible-$2,400):	$6,150

*HSA holders age 55 and older are allowed an additional $1,000 contribution.

Personal Exemption Phaseout:
Under current legislation, the personal exemption phaseout rules will not apply in 2010.

Itemized Deduction Phaseout:
Under current legislation, the itemized deduction phaseout rules will not apply in 2010.

Social Security Wage Base: $106,800
-Earnings cap to avoid reduced social security benefits before year full retirement age is met: $14,160 -Earnings cap to avoid reduced social security benefits in year full retirement age is met: $37,680

Earned Income Credit Information:
The Earned Income Credit applies to working taxpayers who's income falls below certain thresholds. The maximum Earned Income Credit available has been raised to $5,666. This is a refundable credit, so even if you have no taxable income, you may still qualify for this credit. The 2010 thresholds are as follows:
No Children - earnings and AGI must be less than $13,460 or $18,470 if married filing jointly.
One Child - earnings and AGI must be less than $35,535 or $40,545 if married filing jointly.
Two Children - earnings and AGI must be less than $40,363 or $45,373 if married filing jointly.
Three or More Children - earnings and AGI must be less than $43,352 or $48,362 if married filing jointly.
*Investment income may not exceed $3,100.
*Cannot be claimed when filing status is Married Filing Separately.

FEDERAL TAX UPDATES:

Landlords Required to Issue 1099's

Self Employed Health Insurance Premiums

Mileage Deduction Rates

2010 Roth IRA Conversions

Credit For Energy Efficient Home Improvements

First Time Home-Buyer Credit

New and Improved Education Credit

Qualified Section 529 Distributions Expanded

The Making Work Pay Tax Credit

Section 179 Depreciation and Bonus Depreciation

Deduction for Real Estate Taxes Paid

Foreclosure Relief

Capital Gain Exclusion on Vacation or Rental Property Conversions

Deduction for Private Mortgage Insurance

WISCONSIN TAX UPDATES:

$5,000 Subtraction for Certain Retirement Benefits

New Marginal Tax Bracket for High Incomers

Capital Gains Exclusion Reduced

Domestic Production Activities Deduction Eliminated

Minnesota Ends Reciprocity Agreement with Wisconsin

2010 IRA Conversions

2010 FEDERAL TAX UPDATES

Landlords Required to Issue 1099's: Beginning with the 2011 tax year, landlords will be required to track all payments to service providers. If a service provider (such as a plumber or electrician) is paid $600 or more during the calendar year, a 1099 form must be issued. This will pose a significant burden on many taxpayers, especially if no accounting software is used to track the income and expenses of the rental property.

Self Employed Health Insurance Deduction: For tax year 2010, self employed individuals will be allowed to deduct certain health care costs for self employment tax purposes.

Mileage Deduction Rates:

Business Miles	50.0 cents per mile
Charitable Contribution:	14.0 cents per mile
Medical Travel & Moving	16.5 cents per mile

2010 ROTH IRA Conversions: During 2010, the opportunity to convert from a regular IRA to a Roth IRA is available to all taxpayers regardless of income. Previously, a conversion was only available to those who had a modified adjusted gross income of $100,000 or less. Congress has also created an additional incentive to make the conversion; rather than paying the tax in full in the year of the conversion, taxpayers will have the option to elect to report 1/2 of the income on their 2011 tax return, and 1/2 on their 2012 tax return. A conversion to a ROTH IRA should only be done after a thorough examination of your financial and tax situation. For many taxpayers a ROTH conversion will not be appropriate.

Credit for Energy Efficient Home Improvements: Please click here for additional information on qualifying property and credit limitations.

First Time Home-Buyer Credit: The "Worker, Homeownership, and Business Assistance Act of 2009" has extended the $8,000 First-Time Homebuyer Credit through April 30th, 2010. Under the "Homebuyer Assistance and Improvement Act of 2010" qualifying homebuyers with a binding agreement dated on or before April 30th can still qualify for the credit assuming the purchase is completed by September 30th, 2010. A $6,500 credit may also be available for homeowners who have resided in their current residence for 5 consecutive years in the last 8 year period, and have purchased a new principal residence after November 6th, 2009 and on or before April 30th, 2010 (or September 30th, 2010 assuming a binding contract was entered into by April 30th, 2010). Please click here for additional information.

New and Improved Education Credit: The American Opportunity Tax Credit is a modified Hope Credit. The maximum credit will be $2,500, of which up to 40% may be refundable. This credit can be claimed for students in their first four years of higher education. The income phase out limits for this new credit are significantly higher than under the old credit, making it available to higher income taxpayers. This credit is set to expire after 2010.

Qualified Section 529 Distributions Expanded: Funds from a Section 529 plan can now be used to purchase computers and related equipment for higher education purposes.

The Making Work Pay Tax Credit: This credit will be a maximum of $400 for working individuals and $800 for working married couples. Working individuals receive this credit through reduced withholdings (increased paychecks). Self employed individuals will figure the credit directly on their income tax return. Take caution if you have multiple employers. It is possible that you will owe on your 2010 income tax return due to insufficient withholding, whereas normally you might receive a refund. Please contact our office if you need assistance in determining your potential tax liability.

Section 179 Depreciation and Bonus Depreciation: The maximum Section 179 deduction has been increased from $250,000 to $500,000 for tax years 2010 and 2011. 50% bonus depreciation has also been reinstated retroactively to January 1st, 2010 and now available through December 31st, 2010.

Above the Line Deduction for Real Estate Taxes Paid: Under current legislation, this deduction is not available for 2010. Pending legislation may reinstate this deduction.

Foreclosure Relief: For tax years 2007 - 2012, up to $2 million of debt forgiven on the foreclosure one's primary residence is eligible to be excluded from taxable income. The debt forgiven that is excluded from income will reduce the taxpayer's basis in the property. This could result in a capital gain if the Section 121 exclusion limits are exceeded ($250,000 for single filers and $500,000 for married filing joint).

Capital Gain Exclusion On Vacation and Rental Property Conversions: Under current tax laws, when a vacation or rental property is converted to a principal residence and later sold, a portion of the gain on sale may be subject to tax even if the taxpayer would otherwise qualify under the Section 121 Exclusion. The amount subject to tax is based on the fraction of time after 2008 that the property was used as a vacation or rental property over the total time the property has been owned by the taxpayer. For example, assume a taxpayer purchased a vacation home in the year 2001, converted the property to a principal residence in 2011, and sold the property in 2015. The percentage of gain subject to tax will be 13.3% (2/15). Under previous law, a taxpayer would have qualified for the full Section 121 Exclusion as long as he/she lived in the property for 2 of the last 5 years.

Deduction For Private Mortgage Insurance (PMI): The itemized deduction for PMI has been extended thru 2010. To qualify for the deduction, the purchase or refinance of a primary or 2nd residence giving rise to the PMI must have occurred after January 1st, 2007. The deduction is phased out for taxpayers with Adjusted Gross Income (AGI) exceeding $100,000. The deduction is reduced by 10% for every $1,000 above $100,000. The deduction is completely phased out when AGI exceeds $109,000.

2010 WISCONSIN TAX UPDATES

$5,000 Subtraction for Certain Retirement Benefits: Beginning in tax year 2009, up to $5,000 of retirement benefits from a qualified retirement plan or IRA may be subtracted when determining Wisconsin taxable income. To qualify for the subtraction, the following income limitations must be met:

-if your filing status is single, your federal adjusted gross income must be less than $15,000
-if your filing status is married joint, your federal adjusted gross income must be less than $30,000
-if your filing status is married filing separately, your combined adjusted gross incomes must be less than $30,000

New Marginal Tax Bracket for High Incomers: Effective January 1st, 2009, high incomers will be subject to a new marginal tax rate of 7.75%. Previously, the highest marginal rate was 6.75%.

Capital Gains Exclusion Reduced: Effective January 1st, 2009, the new capital gains exclusion percentage will be 30%. Previously, 60% of your qualifying capital gains could be excluded from your Wisconsin taxable income.

Domestic Production Activities Deduction Eliminated: Effective for taxable years beginning on or after January 1st, 2009 the Domestic Production Activities Deduction will no longer apply for Wisconsin.

Minnesota Ends Reciprocity Agreement with Wisconsin: Effective January 1st, 2010, individuals who live in Wisconsin and work in Minnesota will be required to file both a non resident Minnesota income tax return and a Wisconsin income tax return. A tax credit will be available on the Wisconsin return for taxes paid to Minnesota. The four remaining reciprocity states are Illinois, Indiana, Michigan, and Kentucky.

2010 IRA Conversions: Wisconsin has adopted the federal provisions relating to IRA conversions for 2010.