tax cuts
The newly passed and signed 2010 Tax Act, formally named the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, includes several provisions that could affect you. Here is a summary of the information you need to know now.
Major Provisions of the 2010 Tax Act
The new law
- Extends the Bush Tax Cuts 2 more years;
- reduces the estate tax;
- extends unemployment benefits;
- includes an alternative minimum tax (AMT) patch;
- continues through 2012 the lower capital gains tax rates; and
Provisions That May Affect You
Lower Estate Taxes!
The Act temporarily reinstates the estate tax, with an estate tax rate of 35% and an estate tax exemption of $5 million.
Lower Payroll Taxes!
For 2011, the Act reduces the rate for the Social Security portion of payroll taxes to 10.4% by reducing the employee rate from 6.2% to 4.2%. The employer’s portion remains 6.2%.
Family tax savings and money for college!
The Act extends several expired or expiring provisions affecting families, including the following:
- The $1,000 child tax credit amount continues for two years instead of reverting to $500.
- The increased earned income tax credit continues for two years.
- The $3,000 amount for the child and dependent care credit, which was scheduled to revert to $2,400 after 2010, continues for two years.
- The American Opportunity Tax Credit continues for two years.
The Act also makes adjustments to the gift exclusion and generation-skipping transfer (GST) tax that will affect family giving:
- The federal gift tax exemption is increased to $5 million for 2011 and 2012, up from $1 million in 2010.
- The GST tax exemptions are set at $5 million for 2011 and 2012. The exemption limit is scheduled to drop to $1 million beginning in 2013.
Business tax savings!
The Act allows you to write-off 100% of your business property purchases in through bonus depreciation and IRC §179. The property has to be acquired after September 8, 2010 and before January 1, 2012. Certain limits apply, obviously.
The 100% exclusion of gain from the sale of certain small business stock under IRC §1202, enacted by the Small Business Jobs Act of 2010, is extended through 2011.
Needless to say, the 2010 Tax Act is still very new. It is only just being analyzed by professional advisers. Talk to your CPA on how it will affect you. If we can help, feel free t give us a call at 734-459-9970. We are currently accepting new clients for the 2011 tax season.
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