Tax breaks that have helped older taxpayers write off charitable deductions, property taxes and other expenses in 2009 are likely to get a second life soon. They will be extended through 2010 if the unemployment benefits bill that passed the House last week also passes the Senate, as expected.
But the same legislation—the American Jobs and Closing Tax Loopholes Act—could hurt laid-off workers who are hoping for the extension of federal subsidies for their health insurance.
The bill’s main focus is to renew the federal government’s extension of jobless benefits to 99 weeks; they would otherwise typically run out after 26 weeks. That extension expired on June 1, so the Senate is likely to move rapidly on the legislation when it returns from its Memorial Day break on June 7.
The bill renews several provisions that benefit older taxpayers. Here are three that may help you when you do your 2010 tax return:
1. If you are over 70 1/2, you could donate money to charity—the top limit is $100,000 a year—directly from your individual retirement account, without having to declare those IRA distributions as taxable income. That’s a break for those of you who don’t have enough expenses to itemize deductions.
2. If you are a non-itemizer, you also would get a deduction for up to $1,000 in property taxes. This is another break for older homeowners who no longer pay enough interest on their mortgages to justify itemizing.
3. You may be able to deduct your state sales taxes instead of your state income taxes. This would help those older itemizers who have moved from high income tax states to no (or low) income tax states.
Such tasty write-offs could come in handy, but don’t get too comfortable yet. Even if this legislation passes when the Senate reconvenes, these measures will be short-lived—they expire at the end of 2010, along with the heftier pieces of the George W. Bush tax cuts.
That means the fur won’t really start flying until 2011, when you might find it interesting to pull up a chair and watch tax reform take shape.
Linda Stern writes on taxes and other financial issues.
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