Pay your Medical Expenses with an HSA

A health savings account (HSA), is a tax-advantaged medical savings account available to taxpayers who are enrolled in a High Deductible Health Plan (HDHP). Contributions to these plans made on an employer reduces the taxpayer’s taxable income and are reported on Form W-2, box 12, code W. Taxpayers who make contributions directly to their HSA will receive Form 5498-SA and can deduct the contribution on Form 1040, line 25 of their tax return.

What's New for your 2010 Income Tax Return

Due Date
Even though April 15 falls on a Friday this year, the deadline for your 2010 Form 1040 is Monday April 18. Emancipation Day is a District of Columbia holiday that falls on April 15 so the tax filing deadline for the whole nation is deferred to April 18 . If your return won't be ready by then, you can extend the deadline all the way out to October 17 by filing Form 4868 on or before April 18.

Personal exemption: $3,650 ($3,800 in 2012, $3,700 in 2011)

Standard deduction:
MFJ/QW $11,400 ($11,900 in 2012, $11,600 in 2011)
HH $8,400 ($8,700 in 2012, $8,500 in 2011, $8,350 in 2009)
Single / MFS $5,700 ($5,950 in 2012, $5,800 in 2011)

Maximum Earned Income Credit
$5,666 if 3 or more qualifying children ($5,891 in 2012, $5,751 in 2011, $5,657 in 2009)
$5,036 if 2 qualifying children (from $5,028 in 2009)
$3,050 if 1 qualifying child (from $3,043 in 2009)
$457 if no qualifying child (same)

Income Limits for Earned Income Credit

• Three or more qualifying children and earn less than $43,352 ($48,362 if MFJ)
• Two qualifying children and earn less than $40,363 ($45,373 if MFJ)
• One qualifying child and earn less than $35,535 ($40,545 if MFJ)
• No qualifying child and earn less than $13,460 ($18,470 if MFJ)

Wages Limit
The maximum amount of wages subject to social security tax is $106,800 (same as 2009).

2010 IRA and Tax Planning Reference Guide

Excellent resource document courtesy of OppenheimerFunds Retirement Services.

Among the topics include:
Page 1

• IRA Deductibility, Contribution and Eligibility Limits
• IRA Contribution Limits
• Roth IRA Eligibility for 2009–2010

Page 2

• Federal Income Tax Rate Schedules

Page 3

• Retirement Plan Limits and Distribution Rules
• Long-term Capital Gains and Dividends Tax Rates

Page 4

• Federal Estate and Gift Tax Schedules
• Retirement Saver’s Credit
• Health Savings Accounts (HSAs)
• Eligible Long-term Care Deductions

Page 5

• Common IRA-related Tax Forms

Page 6

• Education Savings Tax Incentives
• Social Security Schedules

2009 tax law changes

Plenty of changes to deductions and limits for this year's Form 1040. Here are some to make note of:

Increased personal exemption is $3,650 (up from $3,500 in 2008, will remain $3,650 in 2010).

Increased Standard Deduction:

• Married filing Joint / Qualifying Widower: $11,400
• Head of Household: $8,350
  
• Single / Married filing Separate: $5,700

Note: Head of Household increases to $8,400 in 2010.

Additional Child Tax Credit
Earned Income amount used to figure the additional child tax credit is 15% of the income that exceeds $3,000 (down from $8,500). To take advantage of this credit, complete Form 8812 and report the total on Form 1040, line 65.

Maximum amount of wages subject to social security tax is $106,800 (up from $102,000)

Standard Mileage Rates: Business purposes is 55 cents per mile; medical reasons and moving expenses is 24 cents per mile; charitable purposes is still 14 cents per mile

IRA contribution limits remain unchanged.

Health Savings Accounts (HSAs)
Maximum deduction is now $3,000 ($5,950 for family coverage). Minimum annual deductible of a high deductible plan is $1,150 ($2,300 for family coverage). Complete Form 8889 and report the deduction on Form 1040, line 25.

"Kiddie Tax"

• Investment income over $1,900 of a child age 18 or younger will be taxed at the parent's rate on Form 8615.
• Parents may be able to include on their own return the child's gross income in excess of $1,900 on Form 8814.

New Tax Forms

• Schedule L – Standard Deduction for Certain Filers
• Schedule M – Making Work Pay and Government Retiree Credits