The Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 was designed to provide temporary stability and continuity to the economy by extending tax rates, estate tax laws and certain tax credits, tax deductions, and business tax incentives that had been put in place under the Bush Administration. Some of the provisions of the Tax Relief Act expired at the end of 2011, while others will run out on December 31, 2012. This gives accountants and tax professionals less than a year to make use of the tax planning and tax settlement advantages this legislation provides.
The following tax advantages provided by the Tax Relief Act will expire or revert to previous levels at the end of 2012:
Tax Rates
- Personal tax rates will increase from a range of 10% to 35% to a levels ranging from 15% to 39.6%.
- Long term capital gains tax rates will increase from 0% and 15 % to 10% and 20%.
- Dividends will be taxes at ordinary tax rates instead of 15 %.
Tax Credits
- The American Opportunity Tax Credit, which provides a credit of up to $2500 for each of the first four years of undergraduate education, will expire.
- The Child Tax Credit, which provides up to $1000 in tax credits for minor children, will revert to the previous $500 maximum.
- The Earned Income Tax Credit will revert to allowing a maximum of two dependents, rather than three.
- The Adoption Tax Credit will revert from a limit of $12,650 back to its previous maximum of $5000.
- The Dependent and Child Care Tax Credit will revert from a maximum of $3000 for one child and $6000 for two or more children to maximums of $2400 and $4800 respectively.
Tax Deductions
- The limit on itemized deductions for higher income earners will be reinstated.
- The phase out for personal tax exemptions will be reinstated.
- The tax deduction for student loan interest will revert to the previous tax law that only allows it as a deduction for the first 60 months of repayment.
Estate Tax Provisions
- The estate tax exemption will revert from $5 million back to 1 million.
- The gift tax exemption will revert from $5 million back to 1 million.
- Certain provisions that allow more assets from family owned businesses to pass along to beneficiaries will expire.
Business Tax Incentives
- The 50-percent bonus depreciation allowance for property placed in service will expire.
- The expensing limit will revert from $125,000 to $25,000.
- The expensing limit will revert $500,000 to $200,000.
The provisions of The Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 that are still in effect for 2012 provide significant tax saving and tax settlement opportunities. Experienced tax professionals understand the ramifications of this important piece of legislation and are focused on taking advantage of the remaining tax credits, tax deductions, tax exemptions, and tax incentives for their clients before the window of opportunity closes at the end of 2012.
If you are in need of any type of tax planning, tax preparation or tax settlement services, our experienced tax professionals can provide you with the tax help you need. Our tax specialists are familiar with all of the current and impending changes to the IRS tax code and can ensure that these changes are used to give you the maximum tax advantage for your specific financial situation. For more information about our tax debt resolution services, visit us today at www.professionaltaxresolution.com. Contact us by phone at (949)-596-4143 or by email at info@protaxres.com to receive a free, no obligation consultation.
