The last few years have seen a number of changes in the Federal tax laws. It has become more of a challenge to anticipate the deductibility of expenses or availability of tax credits from one year to the next. Remember when interest on credit cards was deductible as part of itemized deductions? With the interest rates sky rocketing on credit cards, that sure would be nice to have these days. But itemized deductions have been pared back over the years or are only deductible after a certain percentage of your income. Because of our dire economy and the need for the federal government to provide some economic stimulus, we had some special deductions added last year that, accordingly to the latest information from the IRS, won’t be back for our 2010 tax return. Last year you could take an itemized deduction or increased standard deduction for state or local sales taxes on the purchase of a new motor vehicle. That deduction won’t be available for 2010. Similarly, you could choose to take an itemized deduction for state and local sales taxes OR for State Income taxes. In 2010, you will only be able to deduct State Income Taxes. In order to provide some accommodation to the unemployed, in 2009 you could exclude from income up to $2,400 in unemployment compensation. That exclusion will not be available in 2010. On the brighter side, the Making Work Pay credit and the Government Retiree credit may still be available in 2010. Both of these credits were introduced in 2009 and were the subject of one of my earlier Frugal Forum articles. These changes are as of this writing. There is always the possibility that the IRS will not implement all of these changes in order to provide more assistance during these trying economic times. However, nothing has been announced to that effect, and I wouldn’t count on it.
Stay tuned for further news as it becomes available.
Keep those letters coming folks. Send in your money-saving ideas or questions to: The Frugal Forum, P.O. Box 693, Huntley, IL 60142 or by email to: thefrugalforum@gmail.com
