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2010 Tax Guide Update

by Charles Rotblut, CFA and Jean Henrich

Since the publication of our 2010 Tax Guide last month, we have received a few updates and corrections, and they are listed below. These changes have also been made to the online version of the Tax Guide at www.aaii.com/guides/taxguide.

Since some of the tax changes passed by Congress late last year are still being interpreted by the IRS, you should continue to keep an eye out for updated information. The IRS published a bulletin outlining many of the changes in Bulletin No. 2011-2, which can be downloaded at www.irs.gov/pub/irs-irbs/irb11-02.pdf. If you use tax software or a tax publication, check with the publisher for updates.

Changes to 2010 Figures
•    The 2010 standard mileage deduction for business is 50.0 cents and for charitable services is 14.0 cents (2010 Allowable Tax Benefits table, page 17).
•    Regarding Roth IRA eligibility, the modified adjusted gross income (AGI) phase-out level for heads of household in 2010 is $105,000 (2010 Tax Benefit Phase-Out Levels, page 18).

Changes to 2011 Figures
•    The 10% income tax bracket for married taxpayers filing separate returns for tax year 2011 is limited to maximum taxable income of $8,500. The 15% tax bracket applies to taxable income ranging from more than $8,500 up to $34,500. Table 1 below shows the updated 2011 income tax rates for married taxpayers filing separate returns (2011 Tax Rates table, page 20).
•    The standard deduction in 2011 for married persons (or qualifying widows) age 65 or older is $1,150 (2011 Allowable Tax Benefits table, page 21).
•    The 2% reduction in Social Security tax rates for 2011 applies to employees only; employees pay 4.20% and employers pay 6.20%. (2011 Other Tax Items, page 21).

Table 1. 2011 Income Tax Rates for Married Individuals Filing Separate Returns
If Taxable Income Is:  The Tax Is:
Not over $8,500 10% of the taxable income
Over $8,500 but not over $34,500 $850 plus 15% of the excess over $8,500
Over $34,500 but not over $69,675 $4,750 plus 25% of the excess over $34,500
Over $69,675 but not over $106,150 $13,543.75 plus 28% of the excess over $69,675
Over $106,150 but not over $189,575 $23,756.75 plus 33% of the excess over $106,150
Over $189,575 $51,287 plus 35% of the excess over $189,575
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Charles Rotblut, CFA is a vice president at AAII and editor of the AAII Journal. Follow him on Twitter at twitter.com/CharlesRAAII.
Jean Henrich is managing editor at AAII.


Discussion

Jeanne from MA posted over 3 years ago:

Answers my questions perfectly on what chgs for 2010 and 2011 occurred.


Gene from VA posted over 3 years ago:

very good explanation.


Fred from MD posted over 3 years ago:

How does one determine the tax rate for qualified dividends? Does one subtract from total taxable income the total amount of qualified dividends? When I do that and consult the tax rate for married filing jointly the taxable income puts me in the 15 % range, Does that mean the tax for qualified dividends is 0 %? I would appreciate any reply since using the worksheet for qualified dividends seems to me incomprehensible.


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