2010 Tax Relief Act – What Didn’t Get Extended

We’ve been hearing the news about the extension of the Bush-era tax cuts and how these tax law extenders will lower everyone’s taxes. But what you haven’t been hearing about are the items that weren’t extended which may have important tax implications for some.

Unemployment Benefit Exclusion – Under the American Recovery and Reinvestment Act (ARRA) of 2009, the first $2,400 of unemployment benefits an individual received in 2009 were tax free. This provision applied only to benefits received in 2009. Unemployment benefits after 2009 are fully taxable.

Non-Business  Energy  Property Tax Credits – For 2009 and 2010 the credit amount is 30 percent of the sum of expenditures for qualified energy efficiency improvements and property, such as furnaces, water heaters, insulation materials, exterior windows and doors. The credit is limited to a lifetime maximum credit of $1,500 for 2009 and 2010 property. The 2010 Tax Relief Act extends the credit through 2011 but limits the lifetime credit to $500 for purchases between 2006 and 2011. Energy efficient windows expenditures cannot exceed $200 of the $500 maximum.  If a homeowner has already claimed $500 or more in credit through this allowance, they will be unable to claim new credits for improvements made during 2011.

Special RMD Waiver – Because of the large investment losses experienced in many IRA accounts and 401k plans, Congress provided a special Required Minimum Distribution (RMD) exemption for 2009. Investors with IRA accounts were able to skip RMDs that would have normally been required. This special 2009 RMD waiver was for one year only. Regular RMD withdrawals are required in 2010.

Earned Income Tax Credit Advance Payments – Rather than waiting to get the refund when they file taxes, eligible employees were entitled to receive advance EITC payments with their compensation during the year. Legislation signed into law Aug. 10, 2010, repeals the Advanced Earned Income Tax Credit (Advance EITC). Recipients will not be able to claim Advance EITC after Dec. 31, 2010. Although qualified individuals will still be able to claim an Earned Income Tax Credit by filing a Form 1040 for tax year 2011, they will not be able to claim and receive an adjustment or advanced refund during the tax year.

Additional Standard Deduction for Property Taxes – Property owners who use the standard deduction, rather than itemize their individual deductions when filing their income taxes, were entitled to a tax break for tax years 2008 and 2009. This additional deduction was not extended for 2010 and beyond.

First-Time Homebuyers Tax Credit – The 2010 Tax Relief Act does not extend the first-time homebuyer credit except for qualified residences in the District of Columbia purchased before January 1, 2012. The credit ended June 30, 2010 but military personnel may qualify for a one-year extension through June 30, 2011.

Build America Bonds – The Build America Bonds program, a hugely popular Recovery Act initiative that allowed many state and municipal agencies to support infrastructure projects, was not renewed and will come to an end on December 31, 2010.

About the author

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Russell D. Francis, CPA, CFP®

Russell D. Francis, CPA/PFS, CFP® started Portland Fixed Income Specialists, LLC in 2012. Portland Fixed Income Specialists is an Oregon fee-only Registered Investment Advisor. We do not accept commissions for financial products or referral fees. Every decision we make is based on the best interests of our clients.

We simplify the financial planning process for you by carefully considering how it applies to your unique situation. We then provide you with the information, advice and alternatives necessary to align your financial decisions with your values, needs, and goals in life. The benefits of this approach are many – you enjoy a greater understanding of the choices you make and are confident when implementing those choices.

And, because we’re a Certified Public Accounting (CPA) firm as well as a Registered Investment Advisor, you benefit from our knowledge of the complex relationship between investments and taxes.

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  • No, you are not required to take RMDs from an IRA until you retire and no longer have earned income. RMDs are required if you are more than 5% owner of a business sponsoring a qualified plan (401k).

  • I tirned 70 this year and am still self employed working and taking social security. Am i still required to take RMD while i am still working and still contributng to a SEP IRA?

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