November 2, 2010 12:00 am

Some Tax Breaks for 2011 Adjusted for Inflation

More than two dozen tax breaks are subject to cost-of-living adjustments each year. However, due to low inflation, only a handful of tax breaks will be increased for 2011. These include:

  • Adoption credit. The credit increases to $13,360 (up from $13,170 in 2010). The full credit applies as long as modified adjusted gross income (MAGI) is no more than $185,210 (up from $182,520 in 2010). The credit phases out for MAGI between $185,210 and $225,210; no credit can be claimed if MAGI exceeds $225,210.
  • Exclusion for interest on savings bonds used for higher education. Interest is tax free as long as MAGI does not exceed set limits. For 2011, the limits are increased to $106,650 for joint filers and $71,100 for other filers (up from $105,100 and $70,100, respectively). There is a phase-out of the exclusion for interest when MAGI is between $106,650 and $136,650 for joint filers; $71,100 and $86,100 for other filers; no exclusion applies if MAGI exceeds $136,650 for joint filers and $86,100 for other filers.
  • Long-term care insurance premiums. The portion of premiums that can be taken into account as a deductible medical expense increases in 2011. The portion depends on age at the end of the year. For example, for those 40 and younger, the limit is $340 (up from $330 in 2010). For those over 70 years old, the limit is $4,240 (up from $4,110 in 2010).
  • Foreign earned income exclusion. The exclusion for 2011 is $92,900 (up from $91,500 in 2010).

Source: Rev. Rul. 2010-40

Tax Glossary

Disaster losses

Casualty losses such as from a storm, in areas declared by the President to warrant federal assistance. An election may be made to deduct the loss in the year before the loss or the year of the loss.

More terms