2010 TAX ACT: TAX RELIEF, UNEMPLOYMENT INSURANCE REAUTHORIZATION AND JOB CREATION ACT OF 2010
Here are highlights of the tax changes in the 2010 Tax Act:
– Major Provisions
two-year extension of the Bush tax cuts
reduction of estate tax
extension of unemployment benefits
alternative minimum tax (AMT) patch
extension through 2012 of the lower capital gains tax rate introduced in 2003
two-year extension of the repeal of the itemized deduction phase-out and the personal exemption phase-out
– Bush tax cuts referred to above includes lowering of individual income tax rates from 15%, 28%, 31%, 36% and 39.6% to 10%, 15%, 25%, 28%, 33%, and 35%; a doubling of the child tax credit from $500 to $1,000; a gradual reduction in estate taxes that was to be reinstated in 2011; a cut in top capital gains rate from 20% to 15%; and a cut in the top individual rate on dividends from 35% to 15% (in the lowest two tax brackets, the dividend rate is 0%. – Estate tax reinstated at a rate of 35% and an exemption of $5 million (adjusted for inflation after 2011). –AMT patch. For 2010, the AMT exemption amounts are $47,450 for unmarried individuals and $72,450 for married individuals filing jointly. For 2011, the amounts will be $48,450 and $74,450, respectively. – Social Security tax reduced 2% for employees. For 2011, the Act reduces the rate for the Social Security portion of payroll taxes to 10.4% by reducing the employee rate from 6.2% to 4.2%. -Standard deduction, increased for married taxpayers filing jointly, continues for two years. –Child and dependent care credit amount of $3,000 (which was scheduled to revert to $2,400) continues for two years. –Gift tax exemption is increased to $5 million for 2011, and 2012, up from $1 million in 2010.. -Depreciation. The Act extends and temporarily increases additional first-year depreciation provisions for investment in new business equipment. For investments placed in service after September 8, 2010 and through December 31, 2011 (through December 31, 2012 for certain longer-lived and transportation property), the new law provides for 100% additional first-year depreciation, without limit. 50% additional first-year depreciation will apply again in 2012. Also beginning in 2012, a taxpayer will be allowed to write off up to $125,000 of capital expenditures subject to a gradual reduction after expenditures reach $500,000. In 2010 and 2011, the maximum expensing amount is $500,000 with phaseouts beginning after $2,000,000 in purchases. For tax years beginning after 2012, the maximum expensing amount will drop to $25,000 and phaseout level will drop to $200,000. Generally, to qualify for additional first-year depreciation, 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 improvement property. Also, the original use of the property must commence with the taxpayer – used machinery does not qualify.
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