Taxes

Time and Money Saving Tips for Your 2010 Tax Return

Posted: 11/5/2010

The American Recovery & Reinvestment Act will benefit millions of taxpayers.

(NewsUSA) - The American Recovery and Reinvestment Act of 2009 will still benefit millions of workers, families and college students on their 2010 federal tax returns.

The Making Work Pay Credit is equal to 6.2 percent of your earned income, up to $400 for individuals and $800 for joint filers in 2010. It starts phasing out at $75,000 for individuals and $150,000 for joint filers. Like last year, the credit is already being distributed in paychecks through increased federal withholding. (If you don't withhold federal taxes, you'll receive the credit when you file your 2010 return.) Even though you receive this credit in each paycheck, you'll generally still need to claim the credit on your 2010 tax return. The credit on your federal return makes up for the reduced withholding throughout the year.

The credit should be figured using Schedule M and recorded on Form 1040, 1040A or 1040EZ.

Certain energy-efficient home improvements are worth up to $1,500 through the Nonbusiness Energy Property Credit and Residential Energy Efficient Property Credit. Then add this sentence: The $1,500 limit is the maximum amount that can be claimed for both 2009 and 2010 combined, and you must claim the credit in the year that the improvements were made. Both credits should be claimed on Form 5695.

The HOPE credit is now called the American Opportunity Credit and is worth up to $2,500 per student for tuition, related fees and required course materials in 2010. It phases out at a modified adjusted gross income of $80,000 for individuals and $160,000 for joint filers.

Form 8863 must be filed to claim this credit.

Jessi Dolmage, spokeswoman for 2nd Story Software, Inc., the makers of TaxACT, recommends these steps:

1. Using the preview versions of TaxACT made available in early October for year-end tax planning and to get a head start on your 2010 federal return.

2. Reviewing your withholding. The Making Work Pay Credit is being distributed through decreased federal withholding, so having too little tax withheld may result in a smaller refund or more taxes owed.

3. Learning more about the ARRA at www.IRS.gov/recovery and www.TaxACT.com/recovery-act.

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