Capital Gains Exclusion

Personal Residence Capital Gain Exclusion

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Summary of Federal Tax Changes 2011

Summary of Federal Tax Law Changes for 2008 - 2017

Tax breaks in recent tax-relief bills were designed to be phased in over a number of years, or are indexed to inflation. This article explains the changes scheduled to come into effect through 2017 to help you determine how these tax laws affect your long-term plans.

Tax Year Changes

2008 2010 2011 2011 2013 2017

Starting in 2011
Estate Tax Repealed

The federal estate tax is scheduled to be eliminated for estates of individuals who die in 2011. We expect Congress to act in 2010 to keep the tax alive.

Roth IRA Conversions

Starting in 2011, individuals with more than $100,000 of modified Adjusted Gross Income are free to switch a traditional IRA to a Roth IRA. For conversions in 2011, taxpayers can spread the tax due over two years. Half the tax will be due in 2011, and the remaining half will be payable in 2012. Removing the limit on conversions effectively eliminates the income limit on contributions to Roth IRAs. A taxpayer with income too high to use a Roth will be able to contribute to a traditional IRA (which does not have income limits for contributions) and immediately convert to a Roth.

Domestic Production Activities Deduction

In 2011, this deduction increases to nine percent of qualifying business net income. This deduction applies to businesses engaged in construction, engineering or architectural services, film production, or the lease, rental or sale of equipment you manufactured. However, the rate remains 6 percent for oil and gas companies.

State and Local Sales Tax Deduction

The opportunity for itemizers to choose to deduct their state sales tax payments instead of deducting their state and local income taxes ends after 2010, unless Congress acts to extend it.

Educators' Deduction

This deduction for up to $250 of classroom supplies purchased by educators lapses after 2010, unless Congress acts to extend it.

Nontaxable Combat Pay Allowed for Earned Income Tax Credit (EITC)


The election to include nontaxable combat pay in the calculation of earned income for the Earned Income Tax Credit is not available after 2010, unless Congress acts to extend it.

Tuition and Fees Deduction

The deduction for up to $4,000 of college tuition and fees expires after 2010, unless Congress acts to extend it.

Direct Donations of IRAs to Charity

Beginning in 2011, the opportunity for IRA owners age 70½ to directly donate part of their IRA balance to charity will disappear, unless Congress acts to extend it.

Additional Standard Deduction for Property Taxes

Starting in 2011, non-itemizers will no longer be allowed to increase their standard deduction by up to $1,000 of property taxes paid, unless Congress acts to extend this break.

Limits on Deducting Farm Losses

Beginning in 2011, the amount of farm losses you can enter to offset nonfarm income is capped at the greater of $300,000 or your net farm income over the past five years. But this limit will apply only if you get federal farm payments or Commodity Credit Corporation (CCC) loans. You can take suspended losses in later years. The caps will also apply to partners and S firm owners.

Exemptions for the Alternative Minimum Tax

For 2011, the exemption levels drop to $45,000 for married filing jointly, $33,750 for singles and heads of household, and $22,500 for married couples filing separately. Congress is likely to act in 2010 to prevent this from happening. Otherwise, more than 20 million filers will be added to the AMT rolls.

Partial Exclusion for Unemployment Benefits

For 2011, the first $2,400 of unemployment benefits you receive is no longer tax-free.

Sales Tax Deduction for New Vehicles

Beginning in 2011, buyers of new vehicles no longer get a tax benefit for sales tax paid on new vehicles, unless they itemize and elect to deduct sales taxes instead of state income taxes.

Credit for Energy-Saving Home Improvements

The 30 percent tax credit of the cost of energy-saving home improvements reverts to 10 percent after 2011, and is capped at $500.

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