On December 17, 2010, the President signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the "2010 Tax Act") (H.R. 4853). The 2010 Tax Act extends the Bush-era federal income tax cuts for all taxpayers for two years, provides a two-year AMT patch for middle income taxpayers, implements a one-year payroll tax reduction, extends certain business tax incentives, and provides significant, albeit temporary, estate, generation skipping and gift tax relief.
Bush Tax Cut Extensions
Under the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA"), individual income tax rates were scheduled to increase from their current levels (10, 15, 25, 28, 33 and 35 percent) to the pre-EGTRRA levels (15, 28, 31, 36, and 39.6 percent). The 2010 Tax Act extends all current individual rates through December 31, 2012. Similarly, the 2010 Tax Act extends the maximum tax rate of 15 percent (zero percent for taxpayers in the 10 and 15 percent income tax brackets) for long-term capital gains and qualified dividends.....
AMT Patch and Payroll Tax Reduction
The 2010 Tax Act provides an AMT patch by providing higher exemption amounts and other relief for 2010 and 2011 to prevent the AMT from applying to middle income taxpayers. Further, the 2010 Tax Act reduces the employee share of the Social Security taxes from 6.2 percent to 4.2 percent for wages earned in calendar year 2011 on all wages up to the taxable wage base.
For businesses, the 2010 Tax Act increases bonus depreciation to 100 percent, allowing the immediate deduction of all investment, for qualified investments (generally, machinery, equipment and furniture, computer software and certain leasehold improvements) made after September 8, 2010 and before January 1, 2012, and permits 50 percent bonus depreciation for qualified property placed in service during calendar year 2012....
Gift and Estate Taxes
In the context of the federal gift and estate taxes, EGTRRA reduced the federal estate tax and repealed it entirely for decedents dying in 2010. Under EGTRRA, the estate tax was scheduled to return at pre-EGTRRA levels (a maximum tax rate of 55 percent on estates and taxable gifts, in excess of $1 million per spouse) beginning in 2011....
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