Taxation & Estate Planning

ADDITIONAL NEW TAX LAW PROVISIONS

By Charles Rubin

In our last installment of the review of the key tax provisions of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, we take a quick look and some other key provisions of the Act:

I. Rates, Exemptions and Special Rules.

     A. Extension of Bush tax rates through 2012, including favorable capital gains rates and rates on qualified dividends.

     B. Numerous other favorable provisions are extended to 2011 or 2012.

II. Social Security Rate Reduction.

     A. The employee social security tax rate is reduced from 6.2% to 4.2%.
          1. This is for 2011 only. Given the expected deadlock in Congress in 2011 and 2012, the extension of this reduction to 2012 is uncertain.

     B. The self-employed social security tax rate is reduced from 12.4% to 10.4%.
          1. This is for 2011 only. Given the expected deadlock in Congress in 2011 and 2012, the extension of this reduction to 2012 is uncertain.

III. AMT Exemption Amounts Increased for 2010 and 2011.

     A. 2010
          1. $72,450 (up from $70,950 in 2009) for married couples filing a joint return and surviving spouses.
          2. $47,450 (up from $46,700 in 2009) for an individual who isn't married or a surviving spouse.
        3. $36,225 (up from $35,475 in 2009) for married individuals filing separate returns.

     B. 2011
          1. $74,450 for married couples filing a joint return and surviving spouses.
          2. $48,450 for an individual who isn't married or a surviving spouse.
          3. $37,225 for married individuals filing separate returns.

IV. Depreciation and Expensing Provisions.

     A. 100% first year depreciation deduction for qualified tangible personal property placed in service after September 8, 2010 and through December 31, 2011 (through December 31, 2012 for certain longer-lived and transportation property).
          1. Generally, the property must be (1) depreciable property with a recovery period of 20 years or less; (2) water utility property; (3) computer software; or (4) qualified leasehold improvements. Also the original use of the property must commence with the taxpayer - used machinery doesn't qualify.
          2. 50% write off applies in 2012.

     B. Under Section 179 expensing, for tax years beginning in 2012 a small business taxpayer will be allowed to write off up to $125,000 (indexed for inflation) of capital expenditures subject to a phaseout (i.e., gradual reduction) once capital expenditures exceed $500,000 (indexed for inflation)

Full post as published by Rubin on Tax on January 02, 2011 (boomark / email).