Isaacson Isaacson
Sheridan & Fountain, LLP
101 W. Friendly Ave., Suite 400
Greensboro, NC 27401 
(336)  275-7626
 
 January 11, 2010
photo of Desmond
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The following alert is from Desmond Sheridan.
 
 
Many tax law changes for individuals go into effect in 2010
 
Some of the tax changes which take effect in 2010 are:
 
Alternative minimum tax (AMT) will hit many more taxpayers.  The AMT exemption amount for 2010 is $33,750 ($45,000 if married filing jointly or a qualifying widow(er); $22,500 if married filing separately). The AMT exemption amount for 2009 was $46,700 ($70,950 if married filing jointly or a qualifying widow(er), $35,475 if married filing separately).
 
Note:
Congress may deal with the AMT problem either through another one-year patch, as it has several times before, or by revising the AMT in the context of an overall tax reform bill.
 
Required minimum distributions (RMDs) return.
RMDs
must be made for calendar year 2010 from IRAs and employer-provided qualified retirement plans that are defined contribution plans. RMDs for calendar year 2009 were waived.
 
Conversions to Roth IRAs OK regardless of income.
For tax years beginning after 2009, the rule that barred taxpayers with more than $100,000 of modified AGI from converting traditional IRAs to Roth IRAs is eliminated. Additionally, married taxpayers filing a separate return may convert amounts in a traditional IRA into a Roth IRA (before 2010 they were barred from doing so). Additionally, for such conversions made in 2010, any amounts that would be included as income as a result of the conversion will be included in income in equal amounts in 2011 and 2012, unless the taxpayer elects to include the entire amount in income in 2010.
 
AGI-based personal exemption phaseout and itemized deduction reduction are gone.
For 2010, taxpayers with higher levels of AGI will no longer face a phaseout of their deduction for personal exemptions or a reduction in their itemized deductions. For 2009, the personal exemption phaseout began when AGI exceeded these threshold amounts: $250,200 (joint return or surviving spouse), $208,500 (head of household), $166,800 (single) and $125,100 (married filing separately). And the itemized deduction reduction began when AGI exceeded $166,800 ($83,400 for married filing separately).
 
Recapture of first-time homebuyer credit.
Taxpayers who claimed a
Code Sec. 36 first-time homebuyer credit (FTHTC) for homes bought after Apr. 8, 2008 and before Jan. 1, 2009, must begin repaying the credit in 2010. The FTHTC must generally be recaptured (i.e., repaid) in equal installments over a 15-year period. Recapture is accelerated if a taxpayer disposes of his residence or it ceases to be his and his spouse's principal residence before the end of the 15-year recapture period.
 
New modified carryover basis regime.
As part of the estate tax repeal that applies for individuals dying in 2010, the income tax basis rules for property acquired from a decedent in 2010 are similar to the gift tax carryover basis rules but with many opportunities for heirs to get increases in basis. For example, it is possible to increase the basis of assets received from an individual dying in 2010 by $1.3 million and by an additional $3 million for assets going to a spouse. The step-up in basis rules return for 2011.
 
Expired tax breaks.
Unless Congress acts to retroactively revive them, all of the following tax breaks for individuals won't be available this year because they expired at the end of 2009.
  • The ability to exclude part of unemployment compensation benefits. For 2009, up to $2,400 of unemployment compensation benefits received in 2009 was excluded from gross income under.
  • The election to take an itemized deduction for State and local general sales taxes instead of the itemized deduction permitted for State and local income taxes.
  • The additional standard deduction for State and local real property taxes, limited to the lesser of the amount allowable as an itemized deduction for real property taxes or $500 ($1,000 on a joint return).
  • The ability to claim either an itemized deduction or an increased standard deduction for state or local sales or excise taxes on the purchase of a new motor vehicle.
  • The rule allowing taxpayers who are age 70 1/2 or older to make tax-free distributions to charity from an Individual Retirement Account (IRA) of up to $100,000 per taxpayer, per tax year.
About the Writer

Desmond G. Sheridan is a partner in the Greensboro law firm of Isaacson Isaacson Sheridan & Fountain, LLP and is a certified public accountant.  His practice areas are business transactions, tax, corporations, limited liability companies, commercial real estate and estate planning.  Sheridan has served on the Board of Directors of the North Carolina Association of Certified Public Accountants and has been recognized as a "Best Lawyer in America," a North Carolina "Super Lawyer" and a member of the "Legal Elite" by Business North Carolina.  He has given numerous continuing education presentations to CPAs and attorneys.

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Isaacson Isaacson Sheridan & Fountain, LLP

101 W. Friendly Ave, Suite 400
Greensboro, North Carolina 27401
336-275-7626
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