What are the 15 most Important 2011 Individual Tax Changes to the 2011 Tax Returns?
There were several important tax changes took effect in 2011 that will have a significant impact on the federal income tax returns filed for the Tax Year 2011. Some of these tax changes are rather easy and simple to understand such as the standard mileage rates, however tax reporting of foreign financial assets are a little complicated.
The Following represents a list of the tax law changes for 2011 Federal tax returns.
1.2011 Tax Return Due Date.
Since April 15 is a Sunday and April 16 is the Emancipation Day holiday in the District of Columbia, tax returns are due on Apr. 17, 2012.
2.First-Time Homebuyer Credit.In order to claim the first-time homebuyer credit for 2011, a taxpayer (or their spouse, if married) must have been "a member of the uniformed services or Foreign Service, or an employee of the intelligence community on qualified official extended duty outside the United States for at least 90 days during the period beginning after Dec. 31, 2008, and ending before May 1, 2010." .
3.Foreign Financial Assets.a.For tax years beginning after Mar. 18, 2010, certain taxpayers may have to file the new Form 8938 with their returns. Form 8938 is used to report the ownership of specified foreign financial assets (including any financial account maintained by a foreign financial institution) if the total value exceeds a specified threshold.
b.The threshold amount varies depending on if the individual resides in the U.S. and if the tax return is filed jointly with a spouse. It is a separate form and does not replace existing requirements for reporting foreign assets to the Treasury Department using Form TD F 90-22.1.
4.Making Work Pay Tax Credit.The making work pay tax credit has expired and cannot be claimed on the 2011 return.
5.Energy Tax Credits for Homeowners.The "25(C)" credit for energy-efficient improvements has been extended, but the amount of the credit has been reduced to a maximum of $500 per taxpayer per lifetime. Taxpayers who took the maximum $1,500 credit in 2010 are not eligible.
6.Personal Exemptions.The amount one can deduct for each exemption has increased to $3,700 (up from $3,650 in 2010).
7.Repayment of First-Time Homebuyer Credit.Taxpayers who must repay the credit may be able to do so without using Form 5405.
Unlike 2010 conversions, all income resulting from a 2011 conversion must be included in that year's return. For 2010 conversions, half of the resulting income must be reported in the 2011 return, and the rest in the 2012 return.
9.Self-Employed Health Insurance Deduction.For 2011, qualified self-employed taxpayers and S corporation shareholders can use the self-employed health insurance deduction to reduce income tax liability. The taxpayer must not be eligible to participate in an employer-sponsored health plan, and the insurance plan must be set up under the taxpayer's business. Premiums paid for health insurance for the taxpayer, spouse and dependents typically qualify for the deduction. The deduction is taken on Form 1040 Line 29. The deduction from self-employment income for determining self-employment tax, available for tax year 2010, no longer applies.
10.Alternative Motor Vehicle Credit.
The alternative motor vehicle credit cannot be claimed for a vehicle bought after 2010, unless it is a new fuel cell motor vehicle.
11.Capital Gains and Dividends.Lower rates for long-term capital gains and dividends remain in effect for 2011 and 2012. The rate on long-term capital gains and dividends remains at zero for those taxpayers in the 15% income tax bracket and below; the rate is 15% for taxpayers in the 25% bracket and above. Most taxpayers will use new Form 8949 to report capital gain and loss transactions. Schedule D, the form that has been traditionally filed to show these transactions, is now used as a summary sheet.
12.Alternative Minimum Tax.
The alternative minimum tax (AMT) exemption amount increases for tax year 2011 to the following levels:
a.$48,450 for singles and heads of household (up from $47,450 in 2010)
b.$37,225 for married filing separately (up from $36,225)
c.$74,450 for married filing jointly, and qualifying widows or widowers (up from $72,450)
13.Designated Roth Accounts.Taxpayers who rolled over an amount from a 401(k) or 403(b) plan to a designated Roth account during 2010 and did not elect to report the taxable amount on a 2010 return must report half on the 2011 return and the rest on the 2012 return.
14.Standard Deduction Increased.The standard deduction for certain taxpayers who do not itemize their deductions on Schedule A of Form 1040 has been increased. The amount of the deduction depends on the taxpayer's filing status. The standard is $5,800 for single status or married filing separately, $11,600 for married filing jointly or for qualifying widow or widower with a dependent child and $8,500 for heads of household.
15.Standard Mileage Rates.The standard mileage rate for the business use of a car, van, pick-up or panel truck has increased to 51 cents a mile for the first half of 2011, and 55.5 cents per mile for the second half.
Last edited by TaxGuru : 03-16-2012 at 05:00 PM.