Build Wealth by Saving Money On Your Taxes

Saving money on taxes is an easy step to build wealth immediately. You must be aware of tax law changes though in order to take action on opportunities that arise. Last minute legislation was passed to extend the Bush-Era tax cuts for a short period of time. The new law is called the Tax Relief, Unemployment Insurance Re-authorization and Job Creation Act of 2010.  I have been studying this extensive legislation and thought I would pass on some highlights below of the law that will affect most of you:

• Two year extension of the tax rates
• Two year extension of the dividend and capital gain dividends reduced tax rates (0 or 15%)
• Two year repeal of the personal exception and itemized deduction phase out
• 35% top estate, gift tax, and generation skipping tax (GST) rates and $5 million exemption
• Exemption amount will be indexed for inflation starting in 2012
• For 2010, the AMT (Alternative Minimum Tax) exemption amounts will be increased and non-refundable personal credits can be used against AMT.
• You can still use up to $100,000 tax free distributions from your IRA for charitable contributions
• Deduction of state and local sales taxes
• 30% tax credits for energy efficient improvements to the home
• Expansion of Coverdell accounts and definition of education expenses
• American Opportunity Tax Credit for tuition expenses of up to $2500

Some legislation that wasn’t extended:

• 100% of unemployment benefits are taxable now
• The Energy tax credit is extended to 2011 but is now limited to a lifetime cap of $500 for purchases between 2006 and 2011
• Required Minimum Distributions are required and fully taxable
• The First Time Homebuyers Tax Credit was not extended but military personnel may qualify for a one-year extension through mid 2011
• The Build America Bonds program which was very popular will not be renewed in 2011

You can find more information at the Internal Revenue Service site. By being conscious of tax laws that affect you and your financial situation, you can save loads on your taxes and put cash flow into your pocket immediately. Make it a habit to review your tax situation once a year to build wealth effortlessly.