The recent signing into law of H.R. 4853 — the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 — represents the most significant tax law in a decade. At a cost of $858 billion, it represents a tremendous investment at a time when the nation’s economic recovery is fragile. In addition to extending tax rates that were due to expire at year-end, the new law extends certain unemployment benefits through the end of 2011.
Key tax-related provisions of the law include:
PROVISION | DESCRIPTION |
Individual taxes | |
Current tax rates extended through end of 2012 |
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AMT relief |
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Payroll tax for Individuals |
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Tax-free IRA distributions to a qualified charity |
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No income limitation on itemized deductions or personal exemptions, regardless of income level |
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Estate taxes | |
Increase in the estate tax exemption amount |
|
Maximum estate and gift tax |
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Special election with respect to estates of decedents dying in 2010 |
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Repeal of carryover cost basis for 2011 and 2012 |
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Option to utilize unused portion of deceased spouse’s estate tax exemption |
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Education funding provisions | |
American Opportunity Tax Credit |
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Coverdell Education Savings Accounts (ESAs) |
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Student loan interest deduction |
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Above the line deduction for qualified tuition and related expenses extended through 2011 |
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Although this legislation provides clarity for the next two years, there are still long-term considerations as budget deficits and entitlement programs need to be addressed. It is crucial to meet with your clients now to assess their personal financial situations and identify opportunities to take advantage of lower tax rates over the next two years.
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