The Internal Revenue Service just announced its annual inflation-adjusted amounts for 2010. Here’s what you need to know.
1. Standard deductions and personal exemption. For 2010, these standard deductions are unchanged, at:
- Married couples filing jointly (or surviving spouses) – $11,400
- Single taxpayers, and those married but filing separately – $5,700
The standard deduction for heads of households increases to $8,400 (up from $8,350 in 2009).
The personal exemption for 2010 is unchanged from 2009, at $3,650.
2. Qualified transportation fringes. For 2010, Payroll may exclude from an employee’s income:
- $230 per month for qualified parking benefits, and
- $230 per month for transit and vanpooling expenses combined (unchanged from limits set for Mar. – Dec. 2009. In Jan. and Feb., the limit was $120).
These amounts are unchanged from 2009.
3. Adoption credit. The most Payroll may exclude from an employee’s gross income under an employer-provided adoption assistance program is $12,170 ($12,150 in 2009). The same threshold applies to an adoption of a child with special needs. The exclusion begins phasing out for employees with a modified adjusted gross income (AGI) greater than $182,520 and disappears for those with a modified AGI of $222,520. or more. Those limits are $340 higher than in 2009.
4. Medical Savings Accounts (MSAs). For 2010, a high-deductible health plan is one with the following annual deductibles:
- Individual coverage – $2,000 – $3,000 (unchanged from 20009), with an out-of-pocket maximum of $4,050 (up from $4,000 in 2009), and
- Family coverage – $4,050 – $6,050 (also unchanged), with an out-of-pocket maximum of $7,400 (up from $7,350).
5. Earned income credit. For 2010, the earned income credit (EIC) is for:
- one qualifying dependent child – a maximum of $3,050 (that’s 34% of the first $8,970). The max was $3,043 in 2009).
- two or more qualifying children – a max of $5,036 (40% of the first $12,590 of earned income. The max was $5,028 in 2009.
- no qualifying children – a max of $457 (7.65% of the first $5,970). This is unchanged from 2009.
Married couples filing jointly and earning less than $40,545 in 2010 (or $35,535 for single employees) and who have at least one qualifying child may receive advance EIC payments of up to $1,830 ($1,826 in 2009). Payroll should divide this amount by the number of pay periods in a year. Like other benefits, this credit begins phasing out above certain incomes.
6. Long-term care benefits. Under long-term care insurance plans that make per diem benefit payments, here’s what you can exclude from income in 2010:
- $290 per day ($280 in 2009), or
- $105,850 annually ($102,200 in 2009).
7. Foreign earned income exclusion. The maximum foreign earned income exclusion is $91,500 in 2010, up from $91,400 in 2009. [IRC Sec. 911(d)(2)(D)(i).] The max foreign housing cost exclusion in 2010 will be $12,810, up from $12,796 in 2009. [IRC Sec. 911(c)(2).]
