Tax Relief Act of 2010 Offers Many Planning Opportunities
On December 17, the President signed the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (TRA 2010). The contentious path of this legislation as well as the highlights listed below have been well publicized: Extension of the 2010 individual income tax rate structure with the highest marginal rate at 35 percent through 2012
Two percent reduction in Social Security tax for 2011 for employees and self-employed individuals
An Alternative Minimum Tax (AMT) “patch” for 2010 and 2011 Unlimited write off for equipment placed in service after September 8, 2010 and through December 31, 2011
Reinstatement of the estate tax through 2012 with a top rate of 35 percent and a $5 million exemption
This Alert discusses the major provisions of TRA 2010 and some associated planning opportunities. We are pleased to respond to any questions you may have. IMPACT ON INDIVIDUALS
Individual Tax Rates
TRA 2010 extends the 2010 tax rate schedule through 2012, with a top marginal rate of 35 percent. Unless further legislation is enacted the top marginal rate will be 39.6 percent in 2013. In addition the 15 percent bracket is expanded for married joint filers thus easing the so-called marriage penalty for 2011 and 2012. Planning Point: With the current rates extended taxable income deferral remains the principle planning focus. However, individuals subject to AMT may want to accelerate taxable income.
Qualified Dividend and Capital Gains Rates
Under current law smaller amounts of capital gains and qualified dividend income may have a zero tax rate (essentially for taxpayers who wouldn’t otherwise have total taxable income over the 15 percent bracket) and above that they are taxed at 15 percent. TRA 2010 extends the zero and 15 percent tax rates through 2012. Planning Point: Due to the extension of the maximum 15 percent capital...