Congress Renews Tax Cuts and Adds a 2% Employee Social Security Payroll Tax Deduction for 2011
Here are some of the features of the tax legislation passed by Congress last week and signed into law by the President. H.R. 4853, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.
The recently enacted “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010” is a sweeping tax package that includes, among many other items, an extension of the Bush-era tax cuts for two years, estate tax relief, a two-year “patch” of the alternative minimum tax (AMT), a two-percentage-point cut in employee-paid payroll taxes and in self-employment tax for 2011, new incentives to invest in machinery and equipment, and a host of retroactively resuscitated and extended tax breaks for individuals and businesses.
Here's a look at the key elements of the package:
- The current, favorable income tax rates will be retained for two years (2011 and 2012), with a top tax of 35% on ordinary income and 15% on qualified dividends and long-term capital gains.
- Employees and self-employed workers get a reduction of two percentage points in Social Security tax in 2011, bringing the rate down from 6.2% to 4.2% for employees, and from 12.4% to 10.4% for the self-employed.
- A two-year AMT “patch” for 2010 and 2011 provides a modest increase in AMT exemption amounts and allows personal nonrefundable credits to offset AMT as well as regular tax.
- Key tax credits for working families that were enacted or expanded in the American Recovery and Reinvestment Act of 2009 are retained. For example, the new law extends for two years (a) the $1,000 child tax credit (and maintains its expanded refundability), and (b) the American Opportunity tax credit for higher education, and its partial refundability.
- Two crackdowns on deductions for higher-income people have been deferred. For 2011 and 2012, higher-income individuals will not face a reduction in their itemized deductions or a phase-out of personal exemptions.
- Businesses can write off 100% of their new equipment and machinery purchases in the placed-in-service year, effective for property placed in service after September 8, 2010 and through December 31, 2011. For property placed in service in 2012, the new law provides for 50% additional first-year depreciation.
- Many of the popular tax breaks that went off the books at the end of 2009 have been retroactively reinstated for 2010 and extended through the end of 2011. Among many others, the retroactively reinstated and extended individual and business provisions include the election to take an itemized deduction for state and local general sales taxes instead of the itemized deduction for state and local income taxes; the $250 above-the-line deduction for certain expenses of elementary and secondary school teachers; and the research credit. The credit for making energy-saving improvements for a home has been extended for one year, through 2011, but much tougher rules apply after 2010.
- After a one-year hiatus, the estate tax will be reinstated for 2011 and 2012, with a top rate of 35% and a step-up in basis. The exemption amount will be $5 million per individual in 2011 and will be indexed to inflation in following years. Estates of people who died in 2010 can choose to follow either 2010's or 2011's rules. (This overview was provided by the accounting firm Daniels, Uselton and Clay).
- Businesses may also see other benefits for renewable energy investments, which were also extended. To review those credits and benefits go to http://www.btlaw.com/News.asp?News_ID=19905
The Health Care Reform bill that passed earlier this year also provides tax credits to many small employers for providing health insurance coverage to employees.
- Employers with fewer than 25 full-time equivalent employees and average wages below $50,000 that provide qualified health plan coverage are eligible to receive a health insurance federal tax credit. The credit will not apply to premiums for family members working in the business, but you should check with your accountant on the qualifications for this credit.
- Employer must pay a uniform % not less than 50% of the premium.
- Credit of up to 35% on health premiums (50% in 2014) for eligible small employers or 25% for tax-exempt small employers.
- The Internal Revenue Service mailed postcards to 4 million small employers publicizing the new tax credits and to remind them that the new tax credits take effect this year. The postcard and additional information can be located at http://www.irs.gov/newsroom/article/0,,id=221511,00.html
At the America Outdoors Association conference in Salt Lake earlier this month, AON Consulting reported that health insurance premiums are expected to rise 8% to 12% annually for the next few years.
The above information should not be construed as tax advice. Consult with appropriate tax professionals before making any decisions related to the issues covered in this article. Other issues may impact your eligibility or qualification for tax credits or other tax benefits referred to in this article. You should not rely on this article as the basis for making any decisions related to payment or non payment of taxes or withholding for Social Security.
9th Circuit Rules against Two Water Structures for Sheep in KOFA National Wildlife Refug in Arizona
After a long battle, the 9th Circuit effectively banned structures to provide water to distressed desert bighorn sheep in the Kofa Wildlife Refuge. According to Bill Horn, attorney for the wildlife conservation groups involved in the suit, a previous ruling required the US Fish and Wildlife Service (FWS) to determine that water structures were “necessary” for sheep conservation. After The FWS found the structures were “necessary”, the plaintiffs appealed and the 9th Circuit overturned the lower court stating that FWS could not find that the water devices were “necessary” for sheep conservation until they first showed that banning hunting, banning sheep translocations, controlling mountain lions, and restricting other forms of human visitation would not sufficiently conserve the sheep. The Court decided that The Wilderness Act trumped the Refuge Act, according to Mr. Horn.
The Court ruling stated: "Before building the two water structures, the Service did complete a Minimum Requirements Analysis and a Minimum Tool Analysis. Those documents amply describe the reasons for the Service’s decision to construct these two particular water structures, assuming that water structures are necessary at all. But, again, nowhere does the Service address that underlying assumption. The documents leap from the worthy goal of conserving bighorn sheep to the need for additional water structures. The basis for that analytical leap is nowhere described."
Kofa National Wildlife Refuge was established in 1939. The refuge encompasses 665,400 acres of pristine desert that is home to the desert bighorn sheep and the California fan palm, the only native palm in Arizona. Bighorn sheep are found chiefly in the two mountain ranges that dominate the refuge landscape - the Kofa and Castle Dom Mountains.
Census Data Shows Greatest Population Growth in South and West
Overall, the U.S. population grew by 9.7%, which is the lowest rate of growth since 1940. But some states in the South and West saw dramatic growth during this period. The population in the West grew by 19.7% and in the South by 17.3%. The Midwest grew 7.9%. Regionally, the Northeast saw the slowest population growth at 5.5%. To view the full report go to U.S. Census.
The most populous state was California (37,253,956); the least populous, Wyoming (563,626). The state that gained the most numerically since the 2000 Census was Texas (up 4,293,741 to 25,145,561) and the state that gained the most as a percentage of its 2000 Census count was Nevada (up 35.1% to 2,700,551). Regionally, the South and the West picked up the bulk of the population increase, 14,318,924 and 8,747,621, respectively. But the Northeast and the Midwest also grew: 1,722,862 and 2,534,225. Michigan was the only state to lose population, down by .6%
States with highest rates of population growth since the 2000 census:
American Airlines Terminates Agreement with Orbitz
American Airlines won a court battle that will enable it to terminate its business with Orbitz. Travelport, which owns 48% of Orbitz filed for a temporary injunction to block the airline's move, but the judge denied the motion although the case will continue. In the meantime, American Airlines flights will no longer be available for purchase through Orbitz.
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