Big Break for Adoptive Parents

As part of the Health Care Legislation passed earlier this year, the credit for expenses of adopting a child was increased and made refundable.  Prior to this change, the credit was non-refundable and could only be used to reduce the adoptive parent’s tax to zero, with any unused portion of the credit carried over for up to five years and used against future years’ tax.

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How Will the Health Care Bill Affect Your Taxes?

On March 23, 2010, President Obama signed into law the new health care legislation.  The legislation will affect virtually every individual in one way or another and will significantly impact tax returns in the future.  The following overview of the tax-related provisions of the legislation is based upon the House of Representatives’ version and the one signed by President Obama on March 24, 2010.  The provisions take effect over a number of years (2018).

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Small Employer Simple Cafeteria Plans

For years beginning after Dec. 31, 2010, small employers (average of 100 or fewer employees on business days during either of the two preceding years) may provide employees with a “simple cafeteria plan.” (Code Sec. 125(j))

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Employer Tax-Free Medical Benefits Available to Children Under Age 27

As a result of changes made by the recently enacted Affordable Care Act, health coverage provided for an employee's children under 27 years of age is now generally tax-free to the employee, effective March 30, 2010.  Generally, under pre-Act law, to be a qualifying child of a taxpayer for this purpose the child must have been the taxpayer’s dependent under age 19 (or under age 24 in the case of a full-time student).

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Advanced Lean-Burn Technology Vehicle Credits

2010 is the final year for the advanced lean-burn technology motor vehicle tax credit. Advanced lean-burn technology vehicles are passenger cars or light trucks with an internal combustion engine designed to operate primarily using more air than is necessary for complete combustion of the fuel.

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2010 Inflation Adjustments

Every year, many of the various tax limitations, deductions, allowances, etc., are inflation adjusted. The following are the more commonly-encountered values that apply to 2010, along with the prior year's amounts.

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Home Energy Credits

Tax Credit for Residential Energy Improvements – Energy property improvements to a principal residence located in the United States and placed in service during before the end of 2010 qualify for the residential energy improvement credit.  2010 is your last chance to “go green” and get Uncle Sam to cover part of the cost in the form of a tax credit.

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Roth Conversion Limitations Eliminated

Beginning in 2010, legislation: (1) Eliminates the $100,000 modified AGI limit on conversions of traditional IRAs to Roth IRAs, and (2) Permits married taxpayers filing a separate return to convert amounts in a traditional IRA into a Roth IRA. Under prior law, married taxpayers who filed separate returns were restricted from making conversions.

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Plug-In Electric Vehicle Credit

For vehicles bought after February 17, 2009 and before January 1, 2012, the Recovery Act creates a new 10% nonrefundable personal credit for low-speed vehicles, motorcycles, and three-wheeled vehicles that meet the criteria of a qualified plug-in electric...

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