C&L Value Advisors, LLC
January 03, 2011
Below is important information regarding Tax Relief,
Unemployment Insurance Reauthorization and the Job Creation Act of
2010. Please call us if you have any questions.
"Tax Relief, Unemployment
Insurance Reauthorization, and Job Creation Act of 2010"
recently enacted "Tax Relief, Unemployment Insurance
Reauthorization, and Job Creation Act of 2010" is a sweeping tax
package that includes, among many other items, an extension of the
Bush-era tax cuts for two years, estate tax relief, a two-year
"patch" of the alternative minimum tax (AMT), a
two-percentage-point cut in employee-paid payroll taxes and in
self-employment tax for 2011, new incentives to invest in machinery and
equipment, and a host of retroactively renewed and extended tax breaks
for individuals and businesses. Here's a look at the key elements of
- 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
- Employees and self-employed workers will
receive a reduction of two percentage points in Social Security
payroll 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 will keep the AMT exemption near current levels and allow
personal credits to offset AMT. 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.
- Businesses can write off 100% of their
equipment and machinery purchases, effective for property placed
in service after September 8, 2010 and through December 31, 2011.
For property placed in service in 2012, the new law provides for
50% additional first-year depreciation.
- Many of the "traditional" tax
extenders are extended for two years, retroactively to 2010 and
through the end of 2011. Among many others, 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; and the research credit.
- After a one-year hiatus, the estate tax
will be reinstated for 2011 and 2012, with a top rate of 35%. The
exemption amount will be $5 million per individual in 2011 and
will be indexed to inflation in following years. Estates of people
who died in 2010 can choose to follow either 2010's or 2011's
- Omitted from the new law: Repeal of a
controversial expansion of Form 1099 reporting requirements.
- Also not included: Extension of the
Build America Bonds program, which permits state and localities to
issue federally-subsidized municipal bonds.
© 2010 Thomson Reuters/RIA. All rights reserved.
Heidi Wisneski, Adm. Assistant
C&L Value Advisors, LLC