Highlights of Proposed Legislation – Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 – HR 4853
Ordinary Rates – Continue All Current Ordinary Individual Income Tax Rates For 2011 and 2012.- Capital Gains and Dividends – Continue Current 0%/15% Tax Rates For Long-Term Capital Gains and Dividends for 2011 and 2012. Also, 100% Gain Exclusion For §1202 Stock For Purchases Through 2011.
- Estate Tax – For 2010, 2011, & 2012, Estate Tax Rate 35% and Exemption Amount Is $5M. The $5M Will Be Indexed For Inflation Beginning In 2012.
- Estates of Individuals dying In 2010 – May Choose 1) No Estate Tax With Modified Carryover Basis or 2) $5M Exemption Amount, 35% Rate, And Basis Generally Equal to DOD FMV (§1014).
- Unused $5M – $5M Exemption Amount Not Used By Estate of First Spouse To Die May Be Used By Estate Of Second Spouse For Estates of Decendents Dying After 2010.
- Gift Tax – Gift Tax Rate 35%. The $5M Estate Exclusion Amount Used to Reduce Taxable Gifts Made After 2010 And Any Unused Amount Reduces Taxable Estate.
- Charity – Generally, Items Expired After 2009 Routinely Extended In The Past, Extended Through 2011. Allows Charitable Contributions Directly To Charity From IRAs Before February 1, 2011 To Be Treated As Made on 12/31/2010.
- AMT – Provides Indexed AMT Exemptions of $47,450 & $72,450 For 2010 and $48,450 & $74,450 For 2011. Also, Allows Nonrefundable Personal Credits to Reduce AMT For 2010 and 2011.
- Personal Exemptions and Schedule A Deduction Phase-Outs – No Phase-Out of Personal Exemptions or Schedule A Deductions Through 2012.
- Child Credit – No Reduction or Other Changes To Child Credit Through 2012 – Remains at $1,000.
- Marriage Penalty – No Reduction In Size of 15% Bracket On Joint Return or Joint Return Standard Deduction Through 2012.
- Coverdell Accounts – Continue Without Change (Including $2,000 Contribution Amount) Through 2012.
- Student Loan Interest – Rules Remain The Same (Including Pase-Out Levels) Through 2012.
- American Opportunity Credit – Extended (Including Refundable Credit Feature) Through 2012.
- Employer-Provided Educational Assistance – Extended Current $5,250 Exlusion, Etc. Through 2012.
- § 168(k) Up-Front Deduction – For Property Placed In Service After 9/08/10 and Before 1/01/12 – 100% §168(k) deduction. 50% § 168(k) Deduction For Property Placed In Service In Calendar Year 2012. C Corps May Accelerate AMT Credits In Lieu of § 168(k) Deduction.
- Generation-Skipping Tax – Generation-Skipping Exemption $5M With Zero Percent Tax Rate For 2010 Generation-Skipping Gifts. 35% Tax Rate For Generation-Skipping Gifts Made After 2010.
- 2% Reduction In OASDI – Employee’s OASDI Reduced From 6.2% To 4.2% For 2011 and Self-Employed’s OASDI Reduced From 12.4% to 10.4% (Max Savings $2,136).
Questions or Comments?
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Mark Vitek, CPA/PFS, CFP®
…until next week.
Let’s take a look at some advantages to both Renting and Buying a home, while also listing some things to consider when making this big decision.
As the end of the year approaches, so does the end to some tax credits for energy-saving home-improvements. If you plan to take advantage of some of those credits, you will need to act fast. All improvements must be in place and the equipment in service by December 31, 2010 to qualify.
Health savings accounts are great vehicles for accumulating funds for qualified health care expenditures on a pre-tax basis. Workers with high-deductible health insurance coverage and that have set up an HSA can contribute up to $3,050(individuals) and $6,150 (families) for the year 2010 by December 31, 2010. These IRA-like accounts were implemented in order that the individual would have control over their health care dollars and medical expenses. High deductible health insurance plans are defined as plans with a minimum annual deductible of at least $1,200 for individual coverage and $2,400 deductible for a family for 2010.
Planning Tips to Consider:
In this week’s issue, we will discuss the second major type of IRA, the Roth IRA. As a reminder, an individual retirement arrangement (IRA) is a personal retirement savings plan that offers specific tax benefits.
Many current investment strategies direct the client to invest assets while reducing risk through sensible diversification. This approach assumes that the best performing asset class will change each year and cannot be predicted.
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