Useful Income Tax and Retirement Planning Information

There have been several major tax law changes over the past few years with staggered effective dates. These laws have significantly changed the way you may want to consider your financial situation, especially retirement planning. Here is some information that you find helpful:

Income tax information (2010)

Income tax rate schedules for 2010

              
2010 Single Return Rate Schedule
Taxable income levels Tax rate
0 to $8,375 10%
$8,376 to $34,000 15%
$34,401 to $82,400 25%
$82,401 to $171,850 28%
$171,581 to $373,650 33%
Over $373,650 35%

 

              
2010 Married Filing Jointly Rate Schedule
Taxable income levels Tax rate
0 to $16,750 10%
$16,751 to $68,000 15%
$68,001 to $137,300 25%
$137,301 to $209,250 28%
$209,251 to $373,650 33%
Over $373,650 35%

 

2010 standard deduction

Married couples filing a joint return - $11,400
Single return filers - $5,700

2010 personal exemption amount - $3,650

Taxation of dividends and long-term capital gains

For taxpayers in the 10% and 15% brackets, qualifying dividends and long-term capital gains (assets held for more than a year) will be taxed at 5%. For those in higher tax brackets, the special tax rate is 15%. These preferential rates were scheduled to expire at the end of 2008, but the 2006 tax law changes extended these rates through 2010.

 

Estate taxes
Year Estate Size Where Taxation Starts Top Estate Tax Rate
2009 $3,500,000 45%
2010 No estate taxation  
2011 Reinstatement of old (2001) rates with estates over $675,000 being taxed 55%

 

Regular IRA and Roth IRA contribution limits
For tax year IRA contribution limit Additional contribution limits for those age 50 and over
2010 $5,000 $1,000

 

401(k) retirement plan contribution limits
For tax year 401(k) deferral limit Additional contribution limits for those age 50 and over
2010 $16,500 $5,500

 

Education (or Coverdell) IRAs

The annual contribution limit is $2,000 with eligibility phase out beginning at $190,000 (for married filing jointly) and $95,000 of Adjusted Gross Income (some modifications apply).

Annual gift tax exclusion

For 2010, gifts of $13,000 and under are not subject to gift tax.

Social Security

2010 Employee wages subject to Social Security tax of 6.2% - $106,800
2010 Employee wages subject to Medicare tax of 1.45% - no limit
2010 Self employment income subject to Social Security tax of 12.4% - $106,800
2010 Self employment income subject to Medicare tax of 2.9% - no limit
2010 Average monthly benefit for all retired workers - $1,153
2010 Average monthly benefit for retired couples - $1,876
2010 Maximum monthly benefit for a worker at full retirement age - $2,323

 

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