• Making Work Pay: The payroll "tax holiday" is still in effect for 2010. That means that workers get a tax credit of 6.2% on their earned income -- but the credit maxes out at $400 for single filers and $800 for joint filers. The credit is subject to income limits and starts phasing out at $75,000 for singles and $150,000 for joint filers. You will need to file for this credit on Schedule M.
• The Earned Income Tax Credit is a refundable credit for married couples filing jointly with 2010 earned income under $48,362 and singles with income under $43,352. Your income and family size determine the amount of the credit. (Details are in IRS Publication 596.)
• The Retirement Savings Contributions Credit is designed to help low- and moderate-income workers save for retirement. Individuals with incomes of up to $27,750 and married couples with joint incomes of up to $55,500 may qualify for a credit of up to $1,000 per person. Check out Form 8880 for the rules.
• Sales tax: You can deduct sales tax paid in 2010 if the amount was greater than the state and local income taxes you paid. In other words, you get to choose: Write off your sales taxes or write off your income taxes. If you didn't keep your sales-tax receipts, use the IRS' sales tax deduction estimator. Even if you claim the sales tax amount from the IRS tables, you can add in tax paid on vehicles or boats purchased during the year, except to the extent the sales tax rate on them is more than the general sales tax rate. If you live in a state with a high income tax, like California or New York, you will probably be better off claiming your state and local income taxes rather than sales taxes. If you live in a state with no income tax, like Florida, Texas, or Washington, be sure to take the sales tax deduction when you itemize.
• Mileage: Deducting miles driven for work or other purposes can be a huge tax break and save you significant money. Too bad the IRS cut the standard mileage deduction rates for 2010. Here are the new rules: Business mileage = 50 cents per mile (a 9 percent cut!); medical and moving = 16.5 cents per mile; and charitable = 14 cents per mile.
One last thing: The first $2,400 of unemployment benefits you receive in 2010 is no longer tax-deductible.
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