|10 tax law changes in new pension law
But those amounts will drop back to the $2,000 level
in 2010. And the catch-up provision that now allows workers age
50 or older to add another $1,000 to an IRA would have disappeared.
Such future contribution worries are no more. Current IRA contributions levels and catch-up allowances, as well as similar provisions at greater levels for 401(k)s, will be permanent, thanks to the pension law.
the Saver's Credit
The Saver's Credit was also made permanent. This tax break, created
to reward lower-income workers who put money into a retirement account,
was set to expire at the end of 2006. Now eligible workers can continue
the credit, which could cut up to $1,000 off a filer's tax bill.
And next year the income levels used to determine eligibility and
actual credit amounts will be indexed for inflation. This should
allow more taxpayers to take the credit or at least keep many from
While the new pension law technically was designed to address retirement issues, it contains several tax provisions in other areas.
One of the most welcome nonpension provisions is the permanent continuation
of tax-free withdrawals from Section 529 college savings plans.
The tax exclusion had been scheduled to expire at the end of 2010.
There is a bit of a retirement connection: With the 529 tax-free
option now in full and perpetual force, some parents and students
won't have to resort to tapping IRAs to pay for school.
Charities, and those who give to them, also got some
special attention in the pension law, not all of it to taxpayer
donated goods' value
IRS officials have long suspected that taxpayers inflate the value
of donated items. The law had been changed this year to tighten
rules on donated
cars. Now a similar approach is being taken in evaluating the
deductibility of donated clothing and household goods.
The IRS can now deny deductions for goods that are
of "minimal monetary value." Specifically, the law requires
that these items be in good used condition or better.
How will the tax examiner know? When you give goods,
you have to fill out Form 8283, Noncash Charitable Contributions,
detailing your generosity, and send it in with your return. True,
taxpayers can still inflate the used property's value there, but
with the new guidelines, tax examiners might be looking at this
form, and asking follow-up questions, more than usual.