DK&C Views — The 2010 Tax Environment

While we are getting ready for our holiday festivities and New Year’s celebrations, the members of Congress and our President have been hard at work.

On December 17, President Barrack Obama signed the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, which provided a framework for our tax environment moving forward.

We have studied the bill and here are some of the highlights we feel you should be made aware of:

For Individuals
Tax Cuts:
·  Two-year extension of all of the existing tax rates, regardless of income.
·       Top earners remain within the 35 percent bracket
·  Capital gains and dividends tax rate remain at 15 percent
·  The $1,000 child tax credit and marriage penalty relief become effective

Estate Tax:
·  Two-year estate tax adjustment reduces the tax rate to 35 percent
·  Exemption level increases to $5M per person.

Social Security Payroll Tax:
·  Two percentage point reduction of individual Social Security payroll tax to 4.2 percent during 2011.

Alternative Minimum Tax:
·  Two-year patch for 2010 ($72,450 exemption MFJ, $47,450 exemption for non-married) and 2011 ($74,450 exemption MFJ, $48,450 for others)
·  Credits allowed against AMT through 2011

For Businesses
Bonus Depreciation:
·  100 percent bonus depreciation for capital investments purchased after September 8, 2010 and before January 1, 2012
·  179 depreciation expensing thresholds and limitations:
•  2010 & 2011 – $500,000 with $2M limitation
•  2012 – $125,000 with $500,000 limitation

Research & Development Credit:
·  Extended retroactively to 2010 and has been extended to 2011
·  The Refundable AMT/R&D credit in lieu of bonus depreciation has been reinstated for property placed in service January 1, 2011 to December 31, 2012

Qualified Small Business Stock
·  100 percent exclusion of the gain from the sale of qualifying small business stock for stock that is acquired before January 1, 2012 and held for more than five years

For a more detailed discussion of the tax law changes, please click here.

This blog post is for informational purposes only and is not intended and should not be construed to be tax advice.  Please contact Devereaux, Kuhner & Chin LLP directly for more specific guidance.

To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication (including attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

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