Relief Act - Personal Income
December 17, 2010, The Tax Relief, Unemployment Insurance
Reauthorization and Job Creation Act of 2010 was signed
into law by the President.
The personal income tax provisions in this law provide for an
extension of the Bush-era tax cuts which were scheduled to
expire at the end of 2010.
The 2010 Tax Relief Act temporarily extends most of the
tax cuts for 2011 and 2012 only.
Individual income tax
brackets will remain unchanged for 2011 and 2012, keeping
the current structure ranging from 10-35%. The capital gains
tax rates will also remain as is for the next two years.
Payroll taxes are reduced by 2 percentage points.
Social Security tax rate for the
employee-portion will be reduced temporarily to 4.2% for 2011
The employer-portion will remain at 6.2%.
The Social Security wage base remains at
$106,800 for 2011.
Medicare tax rates remain unchanged.
The self-employment tax rate is temporarily reduced 2
percentage points to 13.3% for 2011 only.
Extension of Tax Credits
The Act extended many personal
tax credits through 2012. These credits were either scheduled
to expire or reverted back to previous levels in 2011.
The Estate Tax Credit was
enhanced under the Act. The 2011 Estate Tax exempts the
first $5.0 million of the estate and then imposes a 35% tax
rate on the remainder. This is a significant change from
the 2009 level of $3.5 million exemption and 45% tax rate.
Further, without this provision, the estate exemption level
would have reverted back to $1.0 million.
For higher-end taxpayers, there
is a two year extension to the elimination of the itemized
deduction limitation and the personal exemption phaseout.
Both of the temporary repeals have been extended until the end
Retention of marriage relief
penalty for certain tax brackets.
Deductions for educator
expenses, student loan interest, qualified tuition and state
sales tax have all been extended for one or two years.
As can be seen, the 2010
Tax Relief Act provides many tax saving opportunities
for individuals. Please contact us for further
information regarding your personal tax situation.
Give us a call at 301-657-8080
As always you can call our offices if you have any
questions about these or any other accounting related issues, at 301-657-8080.
Regards, Paul Sullivan, CPA