U.S. Treasury Circular 230 Disclosure: If any tax advice is contained in this communication or attachments, it is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding tax related penalties under federal, state or local law, or (2) promoting, marketing, or recommending to another party any matters addressed herein.
This information is designed to be accurate and authoritative.However, this information is distributed with the understanding that it does not render legal, accounting, or other professional advice, and no liability is assumed in connection with its use.
January 20, 2011
The following is a summary of some of the key elements of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 and its impact on individuals:
- The current income tax rates will be retained for two years (2011 and 2012), with a top rate of 35% on ordinary income and 15% on qualified dividends and long-term capital gains.
- Employees and self-employed workers will receive a reduction of two percentage points in Social Security tax in 2011, bringing the rate down from 6.2% to 4.2% for employees, and from 12.4% to 10.4% for the self-employed.
- A two-year AMT “patch” for 2010 and 2011 provides a modest increase in AMT exemption amounts and allows personal nonrefundable credits to offset AMT as well as regular tax. Without the patch, an estimated 21 million additional taxpayers would have owed AMT for 2010.
- Key tax credits for working families that were enacted or expanded in the American Recovery and Reinvestment Act of 2009 will be retained. Specifically, the new law extends the $1,000 child tax credit and maintains its expanded refundability for two years, extends rules expanding the earned income credit for larger families and married couples, and extends the higher education tax credit (the American Opportunity tax credit) and its partial refundability for two years.
- Many of the “traditional” tax extenders are continued for two years, retroactively to 2010 and through the end of 2011.
…The extended provisions include the election to take an itemized deduction for state and local general sales taxes in lieu of the itemized deduction for state and local income taxes
…The $250 above-the-line deduction for certain expenses of elementary and secondary school teachers
... The increased contribution limits and carryforward period for contributions of appreciated real property (including partial interests in real property) for conservation purposes.
...The provision that permits tax-free distributions to charity from an Individual Retirement Account (IRA) of up to $100,000 per taxpayer, per tax year. Individuals also will be allowed to make charitable transfers during January of 2011 and treat them as if they were made during 2010.
...The look-through rule for certain regulated investment company (RIC) stock in determining the gross estate of nonresidents.
...The increase in the monthly exclusion for employer-provided transit and vanpool benefits to equal that of the exclusion for employer-provided parking benefits.
The 2010 Tax Relief Act extends for an additional year, through 2011, the rule allowing premiums for mortgage insurance to be deductible as qualified residence interest.
The new law did not repeal the controversial expansion of Form 1099 reporting requirements and did not extend the Build America Bonds program, which permits state and localities to issue Federally-subsidized municipal bonds.
The widespread ramifications of the 2010 Tax Relief Act will affect almost every individual, business, and estate.
If you would like more details about any aspect of the new law, please do not hesitate to contact Robert Chalfin at (732) 321-1099.
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U.S.
Treasury Circular 230 Disclosure: If any tax advice is contained in
this communication or attachments, it is not intended or written to be
used, and cannot be used, for the purpose of (1) avoiding tax related
penalties under federal, state or local law, or (2) promoting,
marketing, or recommending to another party any matters addressed
herein.
This information is designed to be accurate and authoritative.However,
this information is distributed with the understanding that it does not
render legal, accounting, or other professional advice, and no
liability is assumed in connection with its use.