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The New Tax Law - What it means for you

posted Feb 12, 2011, 2:55 PM by netSAW Info

 Compiled by Nilanjana Rakhit, CPA, MBA, MST 

                                                                               

President Obama signed a new tax law "The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010" on December 17, 2010.

The new law extends until 2012 Bush-era individual and capital gain/dividend tax cuts; extends unemployment benefits for another 13 months, cuts payroll tax by 2%  for 2011; extends bonus depreciation;  includes an AMT "patch"; limits estate tax exemption at $5 million(adjusted for inflation) and  caps estate tax rate at 35% until 2012.  What it means for:

 

You And Your Family

    • Provides certain tax planning opportunities with regards to individual tax rate, capital gains/dividend tax rate and estate tax planning for next two year.
    • More  take home pay for non-public employees in 2011 due to the reduced employee portion of Social Security tax rate from 6.2% to 4.2%. No change on employer portion. You may want to put   this extra cash into your 401K plan or IRA.
    • Reinstates until 2012, educator expenses,  higher education expense, and sales tax deduction for those who itemize. 
    • No itemized deduction limitations and personal exemption phase-out until 2012.
    • Extends until 2012 the increased standard deduction for married taxpayers filing jointly.  
    • Extends $1,000 Child Tax Credit until 2012 instead of reverting back to $500 after 2010.
    •  Extends $3,000 amount for child and depended care credit  for two more years. 
    • American Opportunity Tax Credit extended until 2012.
    • Extends income and employment tax excludable employer provided education assistance for two years.
    • Student loan interest deduction up to $2,500 extended until 2012.
    • Excludable Coverdell Education Savings Account contribution up to $2,000 extended until 2012.
    • Increases AMT exemption amount to $47,450 for singles, $72,450 for couples for 2010, and to  $48,450 and $74,450 respectively for 2011.
    • Increases gift tax exemption amount to $5 million and sets GST tax exemption amount at $5 million for 2011 and 2012.

 

YOUR BUSINESS:

·        Provides for 100% bonus depreciation for business property acquired  after September 8, 2010 and before January 1, 2012 and 50% bonus depreciation for property placed in service in 2012. No dollar limit applies, not limited to small businesses and can generate net operating loss.

    • Limits sec. 179 expense deduction to $125,000 on investments up to $500,000 for 2012 and then decreases these amounts to $25,000 and $200,000 after 2012.

 

    • Extends for 2010 and 2011 the 15  year depreciation period for leasehold improvements, restaurant building and improvements, and retail improvements.

 

    • Research tax credit expired in 2009.  The new law renews research tax credit for 2010 and 2011.
    • 100% exclusion of gain from the sale of certain small business stock extended through 2011.

The information above is provided for educational purposes.  The 2010 Tax Act is new and is subject to interpretation by the US Treasury and the IRS.

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    Nila Rakhit can be reached by phone at 617-678-4021 or by e-mail at nila.deciphra.com

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