Late Thursday evening, the House passed the Senate’s version of HR 4853, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the 2010 Tax Relief Act) which extends the Bush-era tax cuts to all Americans for two years, provides the much needed AMT patch for 2010 and 2011, and reinstates the estate tax. A last minute amendment proposed in the House to provide a much less generous estate tax on wealthier estates was defeated and thus cleared the way for final passage by a vote of 277-to-148.
In addition to the changes noted above, HR 4853 also includes the following notable stimulus and other provisions:
- A 2% reduction in the FICA payroll tax (and self-employment tax) for 2011 up to a taxable wage base of $106,800. Provides a maximum benefit of $2,136 in 2011.
- 100% bonus depreciation for property placed in service after September 8, 2010 and before January 1, 2012. (January 1, 2013 for certain long-lived property and transportation property)
- 50% bonus depreciation for property placed in service after December 31, 2011 and before January 1, 2013. (January 1, 2014 for certain long-lived property and transportation property)
- The Research Tax credit (the R&D credit) is extended for two years through 2011.
- The 100% small business stock gain exclusion provision is extended for stock acquired before January 1, 2012.
- The parity for employer-provided transit benefits (about $230/month) is extended for 1 year through December 31, 2011.
- Tax-free distributions from IRA plans for charitable purposes are extended for 2010 and 2011 distributions.
The 2010 Tax Relief Act includes many other extenders for expiring individual, business and energy tax provisions. Look for more detailed explanations of these provisions in future Insights. We are all grateful that the Lame Duck congress has finally provided some clarity to the tax situations of individuals and businesses that should help with getting the economy back on the right track.
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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.