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

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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.

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