1. Provide a two-year “patch” of the AMT. The description of this provision by the Joint Tax Committee is:
The provision provides that the individual AMT exemption amount for taxable years beginning in 2010 is (1) $72,450, in the case of married individuals filing a joint return and surviving spouses; (2) $47,450 in the case of other unmarried individuals; and (3) $36,225 in the case of married individuals filing separate returns.
The provision provides that the individual AMT exemption amount for taxable years beginning in 2011 is (1) $74,450, in the case of married individuals filing a joint return and surviving spouses; (2) $48,450 in the case of other unmarried individuals; and (3) $37,225 in the case of married individuals filing separate returns.
2. Temporarily extend the Bush tax cuts through 2012. This means that the current 10-percent, 15-percent, 25-percent, 28-percent, 33-percent and 35-percent individual income tax rates are extended for two years (through 2012). This has particular impact on withholding rates for wage earners beginning January 1, since those rates had been scheduled to be increased at that time. The IRS has already provided a Notice containing the 2011 Percentage Method Tables for Income Tax reflecting the changes made by the tax bill. The Notice is available at the following weblink: http://www.irs.gov/pub/newsroom/notice_1036.pdf
3. Extend the current moratorium on itemized deduction limitations. Under the provision, the overall limitation on itemized deductions does not apply for two additional years (through 2012). In addition, the personal exemption phase-out does not apply for two additional years (through 2012).
4. Teacher expenses. The provision extends the deduction for eligible educator expenses for two years so that it is available for the 2010 and 2011 tax years.
5. Education incentives. The current exclusion from income and wages for employer-provided educational assistance, the student loan interest deduction, and Coverdell education savings accounts will continue to be available through 2012. In addition, the above-the-line deduction for qualified tuition and related expenses is also extended through 2012.
6. Dividends and capital gains tax rates. The regular and minimum tax rates for qualified dividend income and capital gains in effect before 2011 are extended for two additional years (through 2012). This may have some interest for those doing some end of the year tax planning and who were anticipating higher rates in 2011.
7. Tuition and related education expenses. The provision extends for two years (through 2012) the temporary modifications to the Hope credit for taxable years beginning in 2009 and 2010 that are known as the American Opportunity Tax Credit.
8. Estate Taxes. The bill makes a number of changes to the estate tax. One important point is that the bill provides an ELECTION for the estates of decedents who died during 2010. In general, if such an election is made, the estate would not be subject to estate tax, and the basis of assets acquired from the decedent would be determined under the modified carryover basis rules of section 1022. Executors should be aware of the availability of this election so as to determine whether it is in the best interests of the estate to do so prior to filing the estate’s return.
9. Depreciation. The provision extends and expands the additional first-year depreciation to equal 100 percent of the cost of qualified property placed in service after September 8, 2010 and before January 1, 2012 (before January 1, 2013 for certain longer-lived and transportation property), and provides for a 50 percent first-year additional depreciation deduction for qualified property placed in service after December 31, 2011 and before January 1, 2013 (after December 31, 2012 and before January 1, 2014 for certain longer-lived and transportation property).
10. Employment taxes. The provision reduces the employee OASDI tax rate under the FICA tax by two percentage points to 4.2 percent for one year (2011). Similarly, the provision reduces the OASDI tax rate under the SECA tax by two percentage points to 10.4 percent for taxable years of individuals that begin in 2011. A similar reduction applies to the railroad retirement tax.