On December 17, 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was passed which basically keeps the income tax rates and most deductions the same for 2011 and 2012 as they were for 2010. Here are some of the specifics of that new law:

  • All W-2 employees for 2011 will have a one-year 2% reduction in the employee portion of Social Security tax, from 6.2% to 4.2%. This means that starting January 1, 2011 employees will see more net pay in their paychecks.
  • Dividends and long-term capital gains for 2011 will continue to be taxed at 15% for most taxpayers; low income taxpayers will continue to have dividends and long-term capital gains taxed at 0%.
  • “Making Work Pay” provision expires at end of 2010
  • Temporary 13-month extension of unemployment benefits
  • Estate tax rate for 2011 and 2012 will be 35% with an exemption for estates valued below $5 million
  • AMT tax relief will continue to provide higher exemption amounts for middle income taxpayers for 2011: $48,450 for single, $74,450 for married
  • Extension of many tax provisions for individuals, including child tax credits, no reduction of personal exemptions or itemized deductions, marriage penalty relief, expanded earned income credit, dependent care credit, state and local sales tax deduction, teachers’ classroom expense deduction, higher education tuition deduction.
  • Extension of many business credits including 100% bonus depreciation on qualified investments made during 2011 (up from 50%), basically allowing businesses to “expense” capital purchases; research tax credits
  • Mileage allowance for business miles driven will be 51 cents per mile; medical and moving mileage will be deducted at 19 cents per mile; miles driven for charitable organizations will be deducted at 14 cents per mile
  • The 2011 annual gift exclusion will remain at $13,000
  • The 401(k) maximum will remain at $16,500, and most other retirement plan limits will stay the same in 2011.
  • $250 deduction for out-of-pocket classroom expenses by teachers will be continued
  • American Opportunity Tax Credit for up to $2,500 of the cost of tuition and related expenses has been extended for 2011
  • Mortgage insurance premiums deductible as qualified residence interest has been extended for 2011
  • Personal Exemption for 2011 increases to $3,700
  • Owners of Rental Property must issue W-9’s to gather information for all rental property service providers in order to issue 1099’s at the end of the year