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Wednesday, January 5, 2011

New Tax Law passed in December

December 2010-- The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 was signed into law on December 17, 2010.  This legislation will keep tax rates the same as they have been for another two years, keeping the Bush-era income tax cuts in place.  The law also allows a 13-month extension of unemployment benefits.

Capital gains and dividend rates also stay the same, at 15% and 0%  for the next two years.  The law also patches the alternative minimum tax by increasing the AMT exemption for 2010 and 2011.

Many tax breaks that expired at the end of 2009 were also extended, retroactively.  Some of these include; the teachers' deduction for buying classroom supplies, and the deduction for college expenses. 

This law also included a reduction in the social security taxes for employees, from 6.2% to 4.2% on wages up to $106,800.  Self-employed individuals will also see a decrease in their tax.

The estate tax was restored, retroactively for 2010, with a top rate set at 35% and the exclusion amount set at $5 million.

For more information on how this new law will affect you, please contact our office.