Friday, December 17, 2010 at 04:46PM | Staff Capital Gain Tax Rates Remain at 15% Through 2012
President Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2011 (the "Act") as approved by the House of Representatives on December 16, 2010 and the Senate on December 15, 2010.
Here is a brief overview of the provisions contained in the Act.
Capital Gain Tax and Dividend Tax Rates
The Act extends the current capital gain and dividend tax rates (the Bush Tax Cuts) at fifteen percent (15%) through December 31, 2012.
Individual AMT Relief Extended
The Act sets the Alternative Minimum Tax or AMT exemption amount for single taxpayers and head of household at $47,450 for 2010 and at $48,450 for 2011. The 2010 exemption will be $72,450 and the 2011 exemption will be $74,450 for married taxpayers filing a joint income tax return.
Estate and Gift Tax Changes
The applicable estate and gift tax exclusion will be increased to $5 million for tax years beginning January 1, 2010. The maximum estate and gift tax rate is 35%. However, estates of decedents who die in 2010 may elect to use current tax law (i.e. pay no estate tax and use a modified carryover cost basis).
Bonus Depreciation Provisions Extended
Assets purchased and placed in service after September 8, 2010 through December 31, 2011 qualify for bonus depreciation. Qualified property can be written off at 100%, rather than 50%, under the new Act.
New IRC Section 179 Deduction
The Act extends the $500,000 write off rules under Section 179 of the Internal Revenue Code ("IRC") for 2010 and 2011. However, starting Janury 1, 2012, only $125,000 of assets' cost can be written off. Taxpayers' ability to write off assets' cost under Section 179 phases out after $500,000 worth of assets have been acquired. The permitted write off amount will decrease to $25,000 in 2013.
Employee FICA Tax Withholding Reduced
The Act sets the self-employment tax rate at 10.4% and the employee FICA tax rate at 4.2% for calendar year 2011. This means that employees only pay 4.2% of their gross pay instead of 6.2% under 2010 laws.
