Good News For New Parents

For those who itemize their deductions and are recent parents, the US Internal Revenue Service has recently approved a new itemization for the 2010 tax year.  Breast-feeding supplies, such as breast milk pumps and pads are now considered a valid claim under the classification of other medical supplies.

Previously, supplies for breast-feeding were only claimable under the classification of "healthy nutrition".  Now that they are classified as a medical expense, they are reimbursable under a flexible health spending account.  This is covered under section 213d of the Internal Revenue Code.  Assuming the cost of breast-feeding supplies, along with other claims for medical expenses, are not covered by insurance they are allowed to the extent that they are greater than 7.5% of adjusted gross income.

2011 Social Security Tax Break

Part of an extensive tax cut package signed into law last December 17th is a new tax break on social security taxes.  Previous to January 1st 2011, a social security tax of 6.2% was taken from workers yearly wages.  With the signing of this tax cut package social security taxes have dropped to 4.2% per yearly income.  To put in in perspective, this tax cut will drop the amount of tax taken out of your paycheck from $6.20 per $100 of wages to $4.20 per $100 of wages.  Workers who claim the Making Work Pay Credit, which allows for up to $400 to an worker making less than $75000 or up to $800 for an employed couple making less than $150000 will only see the difference from this social security tax break above the Making Work Pay credit.

Long story short:  you may, or may not, have noticed a barely noticeable increase in your paycheck.

Corporate Taxes and Why Many US Businesses are Going Overseas

A recent report by the American Enterprise Institute for Public Policy Research has shed some light on why large businesses are finding it more profitable to shut down their plants and move them to other countries.

Whereas the report noted that the United States' statutory federal corporate tax rate, at 35%, is the highest of all monitored countries, a more important indicator is the higher than average effective average tax rate (EATR.)

In the mid 90s, the US had a lower than average EATR of 29.2% which was quite competitive with the average of 30.2% for most other countries monitored.  Since this time, though, the average EATR for all other countries has dropped to a low 20.6% while the US has stayed at 29% (both 2010 rates).

In short, why wouldn't businesses want to move their plants to other countries where they can save an average of 10% on the taxes they pay out? via tax-news

Extended Tax Deductions for 2010 Tax Year

Here are a few tax deductions that have been extended for the 2010 tax year (2011 filing season):

1. Tuition and Fees:  You can still deduct up to $4000 in college tuition and fees on your 2010 taxes.  This deduction is an "above-the-line" deduction meaning it does not need to me itemized.
2. Student Load Interest:  $2,500 worth of annual interest from student loans can still be deducted.  Older loans, older than 60 months, can still take this deduction as well, but they are subject to income level adjustments.
3. Sales Tax:  In states that do not have an income tax you can claim your state and local sales tax in its place.  Even if your state does have an income tax, you have the option of claiming sales tax instead of income tax, but this would only be preferable if the sales tax is higher than the income tax.

These tax deductions were kept in effect by the passing of the recent Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.  This bill also kept current income tax levels at their current rate.  Income tax brackets had been scheduled to be raised this year.  This would have made us all pay more taxes or get less of a tax refund.  via bankrate.com

Possible Repeal of 1099 Business Expense Reporting Law

Businesses, especially small businesses, may be able to sigh in relief soon.  A law, proposed by the Bush administration, and tacked onto Obama's recent health care bill, that would require all businesses to fill out 1099 forms to report expenses paid to other businesses over $600 in any year, is in hearings for possible repeal.  This law, pending activation in January of 2012, would increase the number of 1099 forms sent to the IRS ten fold and possibly put an undue strain on small businesses.  Via tax-news.

New tax deduction of the day (Motor Vehichle Taxes)

It's tax season and many people are thinking about new tax laws and what new tax deductions can benefit them.  Today we'll detail a new tax deduction for new motor vehicle (car, truck, etc) purchases.

This new vehicle tax deduction will let you deduct the state or local sales tax or excuse tax from new cars, trucks, vans, or any other motor vehichle purchased between the dates of February 16th, 2009 and January 1st, 2010.

This tax deduction is not only for those who itemize their tax dedutions, but also for those tax filers who want to increase their standard deduction.  You can use schedule A on form 1040 for itemized deductions and schedule L on form 1040a or 1040 for increasing the standard deduction.

I hope this helps everyone looking to increase their tax returns this season.  Come back again soon for more tax tips and tax news and, as always, I am not a tax professional.