THE NEW TAX NUMBERS FOR 2010:

Things To Consider
A number of figures used in tax and retirement planning have been updated for 2010. Most limits for pension and IRA contributions have been unchanged. For example:

1. The maximum contribution that can be made to a defined contribution plan in 2010 under Section 415 is the lesser of $49,000 or 100 percent of compensation-the same limit as in 2009.

2. The limit on employee elective deferrals to Section 401K and Section 403b plans has remained at $16,500 in 2010. For those over 50 this is increased an additional $5,000. The limit for Section 457 plan salary reductions has likewise kept steady at $16,500.

3. The maximum elective deferral for a SIMPLE or 401 K SIMPLE plan is $11,500 in 2010.

4. The limit on IRA contributions remains at $5,000 for 2010. Those 50 and older can still contribute an extra $1,000 under the special catch-up provision.

Here are a few of the income tax changes:

The standard deduction for joint filers and surviving spouses who do not itemize in 2010 is $11,400, the same as 2009. For heads of household, the deduction is $8,400, and for unmarried individuals it's $5,700. The aged and the blind get an additional $1,100 or $1,400 added to their standard deductions, depending on their filing status.
The personal exemption has remained steady at $3,650 for 2010. The exemption started to be phased out at $250,200 of adjusted gross income for married filers, $208,500 for heads of household, $166,800 for unmarried individuals and $125,100 for married individuals filing separate returns in 2009. The phase-out has been eliminated in 2010
The phase-out of itemized deductions began at $83,400 of adjusted gross for married individuals filing separate returns, and $166,800 for all other taxpayers. The phase-out has been eliminated in 2010.

And here are some other items that may be important to your clients.

The social security tax rate for individuals stays at 7.65% in 2010. The rate for self-employed individuals also remains constant at 15.3%. The taxable wage base for the OASDI portion is $106,800 in 2010-and that gets hit with the full 7.65% tax for individuals. Any additional compensation over that limit is subject to only the 1.45% for the Medicare portion.
In 2010, the federal annual gift tax exclusion amount has remained at $13,000. The lifetime gift tax exemption has stayed at $1 million; however the rate on gifts above $1 million is reduced to 35%.
The federal estate tax exemption was $3.5 million in 2009, and as of right now is unlimited in 2010. Watch for probable action on federal estate taxes by the Congress and President. Most experts expect the federal estate tax exemption for 2010 to be reinstated at $3.5 million. Many of those same commentators are suggesting that the federal estate tax exemption in 2011 will return to $1 million in 2010.

These changes may affect your client's retirement, tax plans and estate planning.

AS ALWAYS, PLEASE FEEL FREE TO CALL TO DISCUSS THESE OR OTHER FINANCIAL SECURITY ISSUES OF CONCERN.

Sincerely,Weatherby & Associates, PC
Henry C Weatherby
www.careconnecticut.org