Monday, December 20, 2010
Congress has passed the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. President Obama signed the $858 billion package into law
almost immediately. The Senate passed the bill on Dec. 15 on a vote of 81 to 19. The House followed on Dec. 16, 277 to 148, with 112 Democrats and 36 Republicans voting no.
Passage of the legislation avoids tax increases, scheduled to go into effect automatically on Jan. 1, 2011, on everyone’s individual income, capital gains, and dividend income and on estates. The bill also includes other tax benefits for the horse industry supported by the American Horse Council.
After a bit of brinksmanship over extending the Bush-era tax cuts following the November elections, President Obama and Republican leadership sat down and hammered out
the legislation. There was some opposition in the House to extending the cuts for those making more than $250,000 a year and exempting estates valued at up to $5 million from the estate tax, out it was not strong enough to allow a tax increase on all Americans to go into effect on Jan. 1.
The tax rate on capital gains will remain at 15 percent for another two years, rather than rising to 20 percent. The tax rate on dividends will remain at 15 percent for another two years, rather than being taxed at the same rate as a taxpayer’s ordinary income, which could be as high as 35 percent.
Payroll taxes for all workers will be reduced 2 percent from 6.2 percent to 4.2 percent for 2011 on wages up to $106,800. This will put up to $2,136 extra in the pocket of every U.S. worker.
Estate tax rate and exemption - Effective Jan. 1, 2011, the top estate tax rate will be 35 percent with an exemption of $5 million for individuals and $10 million for married couples through 2012. This means that only estates valued at over $5 million ($10 million for married couples) will be subject to the tax.
Contribution of property for conservation purposes - Under legislation passed a number of years ago, a landowner with 50 percent of more of his/her income from agriculture could get a deduction for the contribution of a conservation easement up to his/her full income, with any unused amount carried forward for 15 years. This provision had expired and the deduction was limited to 30 percent of income.
The tax bill reinstated the conservation easement benefit for two years, through 2012, for contributions made in taxable years after Dec. 31, 2009.
Posted by GP at 4:19 PM