Table of Contents
You should consider the items in this section when figuring the amount of your tax withholding for 2011.
Recent legislation (Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010) extended many of the tax provisions that were set to expire in 2010. This section lists only those provisions that were changed in addition to being extended, as well as those that were not extended. Also listed are tax benefits with adjustments for inflation. For more information, see IRS.gov.
Income limits for excluding education savings bond interest increased. In order to exclude interest, your modified adjusted gross income (MAGI) must be less than $86,100 ($136,650 if married filing jointly or qualifying widow(er)).
Qualified charitable distribution (QCD). Tax-free treatment of distributions from traditional and Roth IRAs for charitable purposes has been extended through December 31, 2011, with the following special rule. For QCDs made during January 2011, you can elect to have the distribution deemed to have been made on December 31, 2010. If you make this election, the QCD will count toward your 2010 exclusion limit of $100,000, as well as your 2010 minimum required distribution.
Standard mileage rate. The rate for business use of your vehicle is increased to 51 cents per mile. The rate for use of your vehicle to get medical care or move is increased to 19 cents per mile. The rate of 14 cents per mile for charitable use is unchanged.
Alternative minimum tax (AMT) exemption amount increased. The AMT exemption is increased to $48,450 ($74,450 if married filing jointly or a qualifying widow(er); $37,225 if married filing separately).
Nonbusiness energy property credit. This credit has been extended for 1 year with a reduced rate of 10%. Amounts provided by subsidized federal, state, or local energy financing do not qualify for the credit. The energy-efficiency standards for qualified natural gas, propane, or oil furnaces, or hot water boilers have been increased. For 2011, the credit is limited as follows.
A total combined credit limit of $500 for all tax years after 2005 (Form 5695, Part I).
A combined credit limit of $200 for windows for all tax years after 2005.
A maximum credit for residential energy property costs of $50 for any advanced main air circulating fan; $150 for any qualified natural gas, propane, or oil furnace, or hot water boiler; and $300 for any item of energy-efficient building property.
Adoption credit or exclusion. The maximum adoption credit or exclusion for employer-provided adoption benefits has increased to $13,360. In order to claim either the credit or exclusion, your MAGI must be less than $225,210.
Temporary decrease in employee's share of payroll tax. Social security tax will be withheld from an employee's wages at the rate of 4.2% (down from 6.2%) up to the social security wage limit of $106,800. There will be no change to Medicare withholding.The same reduction applies to net earnings from self-employment—the temporary rate will be 10.4% (down from 12.4%) up to the social security wage limit of $106,800. The method of figuring “one-half of self-employment tax” for adjusted gross income will change slightly, and a worksheet is provided (see Worksheet 3).
Increase in additional tax on certain distributions not used for qualified medical expenses. The tax on distributions from health savings accounts (HSAs) and Archer MSAs made after December 31, 2010, that are not used for qualified medical expenses, is increased to 20%.
Three or more children lived with you and you earned less than $43,998 ($49,078 if married filing jointly),
Two children lived with you and you earned less than $40,964 ($46,044 if married filing jointly),
One child lived with you and you earned less than $36,052 ($41,132 if married filing jointly), or
A child did not live with you and you earned less than $13,660 ($18,740 if married filing jointly).
Also, the maximum AGI you can have and still get the credit has increased. You may be able to take the credit if your AGI is less than the amount in the above list that applies to you. The maximum investment income you can have and get the credit has increased to $3,150.
Health coverage tax credit (HCTC). Beginning after February 12, 2011, the credit has decreased to 65% (from 80%) for amounts paid for qualified health insurance coverage for you, your spouse, and other qualifying family members.
Roth IRAs. If you rolled over or converted part or all of another retirement plan to a Roth IRA in 2010, or made an in-plan rollover to a designated Roth account after September 27, 2010, and did not elect to include the resulting taxable amount in income for 2010, you must report half of that taxable amount on your 2011 return and the other half on your 2012 return. See the Instructions for Form 8606 for more information.
Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.
The federal income tax is a pay-as-you-go tax. You must pay the tax as you earn or receive income during the year.
As a wage earner, you pay federal income tax by having it withheld from your pay during the year. This is your “withholding.” Your withholding is based on the number of allowances you claim when you file Form W-4, Employee's Withholding Allowance Certificate, with your employer.
The purpose of this publication is to help you check your withholding and, if necessary, prepare a new Form W-4 to adjust your withholding. When you first start a new job, you must fill out a Form W-4 and give it to your employer to establish your initial withholding. You can adjust your withholding by giving a new Form W-4 to your employer at any time.
Internal Revenue Service
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Internal Revenue Service
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