Changes for the 2011 Tax Year and Other Significant Items

Taxpayers are allowed to deduct up to $500,000 of the cost of capital assets for 2010 & 2011.

Are scheduled to increase to 20% in 2011.

The lower 15% tax rate on qualified dividends is scheduled to be eliminated as of 12/31/10.

The deduction for sales tax paid is scheduled to be eliminated as of 12/31/10.

The amount of interest allowed to be deducted on a home equity loan or mortgage refinance may be limited in certain situations. Generally speaking, your interest deduction is limited to interest on $100,000 of new debt in addition to the amount of existing debt at the time you refinanced or obtained your home equity loan. For example, if your original mortgage was $250,000 but had been paid down to $200,000 at the time you refinanced and took out a new loan in the amount of $400,000 only interest on $300,000 would be deductible. This is $100,000 in addition to the original loan balance at the time of refinancing ($200,000). Interest on the remaining $100,000 (the difference between the full $400,000 new loan and the allowed deductible loan amount of $300,000) would be considered non-deductible personal interest. Further, alternative minimum tax issues may apply. If you have questions or concerns about this area please call our office.

Increases to $13,130 and is refundable. For special needs children, the credit applies even if qualified expenses are not incurred.

Maximum amount is 35% and the maximum eligible expenses is $3,000 for one qualifying individual and $6,000 for two or more.

Threshold is at $1,700.

Maximum amount remains at $2,000.

For estimated taxes of higher-income individuals remains at 110% of prior year's tax liability

Deduction remains at 100% of premiums paid.  This will NOT be allowed as a business deduction.  The deduction of self-employed health insurance premiums as a business deduction (thereby reducing self-employment tax) was limited to only 2010.

Maximum salary deferral increases to $16,500 (50 and older catch-up limit is $5,500 additional).

Maximum salary deferral increases to $11,500 (50 and older catch-up limit is $2,500 additional).

For business driving is 51¢ a mile and the rate for medical and moving mileage is 19¢ a mile. The charitable driving rate is 14¢ a mile.

Children (under age 19 at the end of the year or under age 24 if a full time student) with investment or unearned income of more then $1,900 may be subject to tax based on their parent's income tax rates.  For these children, the first $950 of investment or unearned income is tax free.  The next $950 of investment or unearned income is taxed at the child's rate.  Investment or unearned income in excess of $1,900 will be taxed at the parent's rate.

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