Highlights of the Tax Relief Act
Last week President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. This legislation included a number of provisions which extended tax cuts which were slated to sunset (go away) at the end of 2010. It also added a couple of new provisions to: reduce the tax for Social Security, extend individual income tax rates, and keep some key business tax deductions. If you’d like a detailed explanation of the act go here or call your ShindelRock accountant. Throughout this post I’ll reference the page(s) to refer to in this explanation if you want more details. If you’d really like to go all out and read the actual act go here. Otherwise here’s a summary of the items which will affect most of our readers:
Individuals
- The federal income tax rates will remain the same through 2012 (Pages 2 – 5)
- The child tax credit will remain at $1,000 per child through 2012 (subject to certain income limits) (Pages 8 – 9)
- Dividend and Capital Gains rates have been extended through 2012 (Pages 25 – 28)
- AMT exemption amounts are increased for 2011 and 2012 (Pages 37 – 38)
Gift and Estate Taxes (Pages 39 – 53)
- Choice for 2010 – Originally the 2010 year was an “estate tax free” year (with some affects to basis). There is now a choice to either file under the original rules or use the new rules. A lot of this will depend on how each choice will affect the basis of the assets in the estate
- The new rules set the exclusion/exemption amount at $5 million and a maximum rate of 35%. Starting in 2011 there will be no choice. These limits are in effect until 2012 (the $5 million will be indexed for inflation).
- If you are in a situation where you may want to explore these options I would strongly suggest contacting us to discuss the details. This part of the Act is not for the feint of heart!
Businesses
- Bonus depreciation has been extended and expanded. Under the 2010 rules, a deduction for 50% of the total cost of qualified property placed in service in 2010 is allowed. For property placed in service from September 8, 2010 to January 1, 2012 the 50% will be increased to 100%. After January 1, 2012 until January 1, 2013 it will revert to 50% (Pages 54 – 59).
- Section 179 depreciation limits have been adjusted slightly. Here’s a table detailing it (Pages 60 – 61):
|
Expense Limit |
Property Purchase Limit |
|
|
2010 |
$ 500,000 |
$ 2,000,000 |
|
2011 |
$ 500,000 |
$ 2,000,000 |
|
2012 |
$ 125,000 |
$ 500,000 |
|
2013 |
$ 25,000 |
$ 200,000 |
There are a number of credits extended as well as other miscellaneous items for both businesses and individuals. CCH has published a good analysis of the Act that provides some examples. If you have any questions I would encourage you to contact us.