The Wait Is Over!

Congress recently passed the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. Now, we have some certainty regarding the immediate tax picture and can help you make better decisions regarding your tax presence. The first step of that process is to know the rules that your are following. We’re going help you with that today by providing you with highlights from the above Act.

Important Tax Rates remain the same:

Your individual income tax brackets did not move; the top bracket is frozen at 35%
Capital gains & dividends tax rates are still at a reduced rate of 0% or 15%; the same qualification parameters exists
Many popular tax credits and deductions were extended, including (among others):

· Child Tax Credit

· Earned Income Credit

· Energy Efficiency Credit

· Many popular Education related credit and deductions

Temporary modification of Estate, Gift and Generation-Skipping Transfer Tax for 2010 - 2012

There is a 35% top rate and a $5 million exemption for estate, gift and GST tax
The legislation contains an option for 2010 decedents. Executors may elect to be taxed under the 2010 rules of no estate tax (or generation-skipping tax (GST)) and with the modified carry-over basis regime in place for the sale of inherited assets.
Unused exemption may be transferred to spouse.
Exemption amount indexed for inflation beginning in 2012
Temporary Employee Payroll Tax Cut

The Act provides a payroll tax break during 2011 only. The IRS regulations state that the employee tax rate for social security tax in 2011 is 4.2%. The employer tax rate for social security remains unchanged at 6.2%. The 2011 social security wage base limit is $106,800. In 2011, the Medicare tax rate is 1.45% each for employers and employees, unchanged from 2010. There is no wage base limit for Medicare tax. Employers should implement the 4.2% employee social security tax rate as soon as possible, but not later than January 31, 2011.
Extension of Unemployment Insurance

The unemployment insurance proposal provides a one-year extension.


So, what does this mean for you and your tax planning? As the old CPA joke goes, “it depends”!!! And it truly does, each individual and/or business is unique and their tax picture should be analyzed and dealt with as such. With that said, generally speaking, this tax law extension pretty much allows you to operate as business as usual for the next 2 years in regards to your tax planning. Be diligent, involve your CPA, and if you have questions, do not hesitate to call a qualified tax professional.

Happy Holidays to you all and we here at McArthur & Company wish you a happy and prosperous New Year!!!

brad@mcarthurco.com
704.544.8429