Congress has adopted the 2010 Tax Relief Act. The Act contains a two-year extension of the Bush-Era tax cuts that was negotiated by the President and Republicans, and significant estate tax relief, as well as a trove of other tax breaks for businesses and individuals.
Highlights are as follows:
- The income tax brackets for individuals will stay at 10%, 15%, 25%, 28%, 33% and 35%.
- The standard deduction for married taxpayers filing jointly ($11,600 for 2011) will be twice as much as the standard deduction for single taxpayers ($5,800 for 2011).
- There will be no high-income taxpayer cap or reduction on either itemized deductions or personal exemptions.
- The rules for capital gains and qualified dividends are extended resulting in a maximum rate of 15%.
- The alternative minimum tax “patch” is extended for two years.
Estate Tax Relief:
- The estate and generation skipping tax exemption for 2011 and 2012 is increased to $5,000,000 and the top tax rate reduced from 55% to 35%.
- Any unused exemption amount can be used by a surviving spouse.
- The gift tax and the estate tax are reunified.
- The stepped-up basis rules are reinstituted beginning with decedents dying after December 31, 2009.
- Executors for decedents dying during 2010 can elect between the existing 2010 estate tax rules and the new estate tax rules enacted by the 2010 Tax Relief Act.
This is obviously a very limited review of some of the primary income and estate tax provisions of the 2010 Tax Relief Act. For more information, read the IRS Bulletin or download the technical explanation prepared by the Joint Committee on Taxation. You are also encouraged to consult with your tax professional or contact someone at DBL Law to discuss your specific situation.
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