Big Changes Affecting Your Money Are Coming in 2010

Um dólarEarlier this year, the Labor Department announced that standard deductions, federal income tax brackets, and personal exemptions for most tax filers will remain unchanged in 2010. These amounts typically rise by the rate of inflation every year. This year though with the economy still sluggish taxpayers will see no increase in these amounts which is a departure from normal.

This will be just one of a number of significant changes that will influence you and your money in 2010. Whether you’re working or retired, a spender or a saver, at least one of these changes is bound to affect you. All are changes you need to be aware of.

Here are five of the biggest that will arrive in the new year.

Income Limits for Roth IRA Conversions Are Going Away

Since its inception in 1997, the Roth IRA has maintained restrictions for who could invest in it. Up to this point, only taxpayers with an adjusted gross income of $100,000 or less have been able to convert their traditional IRA balances over to the Roth IRA. That leaves a large swath of investors out of luck.

But that’s about to change. Starting in 2010, anybody will be able to convert to a Roth IRA regardless of income or filing status. The IRS will even allow you to split the tax bill over two years if you convert in 2010.

While individuals will still be taxed on any deductible contributions or earnings that are converted to a Roth, giving more people greater access to one of the best vehicles for retirement saving is a good thing.

Credit Card Legislation Aimed at Protecting Consumers Is Coming

President Obama recently signed the Credit Card Accountability Responsibility and Disclosure Act of 2009 into law and it will take effect on February 22, 2010. The bill is aimed at protecting consumers from unfair lending practices and treatment from credit card companies.

Among the changes that are coming include giving consumers at least 45 days notice of rate increases, banning the practice of “any time, any reason repricing” of existing balances, and providing protection from misleading credit terms.

No Social Security Cost of Living Increase

For the first time since 1975, the Social Security Administration will not be making a cost of living adjustment to the monthly payments sent to retirees. The adjustments have typically been in line with changes in the consumer price index but with prices having fallen in the past year the SSA has decided that no increase is warranted.

Instead, the IRS will be sending one-time payments of $250 to recipients as a means of providing aid to help offset the lack of increased benefits.

Co-Insurance vs. Co-Pay

One of the unfortunate side effects of increasing health care costs is the move from the co-pay to co-insurance. Whereas the co-pay called on the insured to contribute a flat dollar amount towards expenses, co-insurance will require individuals to pay a percentage of the costs. And many insurance plans have already begun making the move.

This will be a further increase in health care costs for you in 2010 on top of the likely 5-10% increase in monthly premiums.

Itemized Deduction for Sales Tax Is Going Away

For the last several years, taxpayers who itemize have been given the option of deducting their state and local income taxes or deducting their sales tax. This has been a big boon to people in states with no state income tax like Florida or Nevada.

But, alas, all good things must come to an end and so too will the sales tax deduction option. Most individuals who itemized likely saw more benefit with the income tax deduction anyway so for them nothing will really change. But for those who took the sales tax deduction, expect a higher tax bill.

Photo credit: marcus nunes

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Author Info

This post was written by David Dierking. David lives outside Milwaukee, Wisconsin and has been working in the financial services industry for over 13 years with a background in investments, accounting, and marketing. He earned his Chartered Financial Analyst designation from the CFA Institute in 2004 and was recently published in the Milwaukee Business Journal. You can also check him out at The Ultimate Fit Challenge

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