New Tax Breaks for 2011

Every year, the IRS will introduce a number of new tax breaks. While some of these tax breaks only benefit select groups of people, others can bring substantial savings to all taxpayers. It is recommended that you keep yourself updated with the new tax breaks that are implemented every year, so that you will not miss out on any deduction that you may be eligible for. Here are some of the more important tax breaks that were introduced in the year 2011.

Social Security Tax Break

If you are an employee, you were required to pay 6.2% of your initial $106,800 annual wages earned to Social Security last year. This means that for every $100 of wages you earned, you had to pay $6.20. This amount has changed with the new social security tax break. Presently, you only have to pay a social security tax of 4.2%, which means that you will have more money to spend.

Higher Standard Deductions

If you are filing your taxes with the standard deduction method, the higher standard deductions that were implemented this year may be beneficial to you. The standard deduction for single taxpayers and married taxpayers who are filing separately is now $5,800, which is an increase of $100 from the previous year. For those who are married and filing jointly, the standard deduction is $11,600. If you are filing as a head of household, you will be allowed a standard deduction of $8,500.

Personal Exemption

There is also a slight increase in the personal exemption amount this year. While the personal exemption amount last year was $3,650, this year’s amount is $3,700.

PEP and Pease Limitations

If you are a high-income taxpayer, you will be glad to know that there is a temporary repeal of the “personal exemption phase-out”, or PEP, and Pease limitations. A reduction in personal exemptions and an increase in adjusted gross income, as well as a 3% reduction of itemized deductions at the top of the brackets, ensure that you will be able to hold on to your personal exemptions and get the full value of your itemized deductions. This temporary repeal is expected to last for two years.

Tax Breaks for Going Green

Although a number of important “going green” tax benefits from previous years are no longer available, there are new ways for you to save on taxes this year. The original hybrid vehicle credit has been replaced by a plug-in vehicle credit. If you purchase a plug-in vehicle, such as the Chevy Volt, Ford Focus Electric, or the Nissan Leaf, you will be entitled to a federal tax credit of $7,500. You can use this credit to lower your regular tax or alternative minimum tax. If you use an electric car conversion kit to convert your gas-guzzling car into a plug-in car, you can avail of a federal tax credit that is equivalent to 10% of the total conversion cost. The maximum amount for this tax credit is $4,000. There is also a new tax deduction for installing solar panels for heating water or generating electricity in your home, which is 30% of the total cost of installation.

To find all of the new tax breaks please visit TurboTax Online. TurboTax Online has everything you need to get the biggest refund possible.