How the 2010 tax law affects your taxes

With all the uncertainty in Washington, you may have wondering and/or worrying what is going on with taxes in the next few years. Now that the 2010 tax relief act has been passed the picture is a bit clearer. Here are a few highlights of the extension:

1. The current income tax rates in which start at 10 percent and top out at 35 percent will be in place for two more years. The rates were previously schedule to rise in 2011.

2. The rate for which an employee pays into social security has been reduced from 6.2% to 4.2%. This basically means for ever $1,000 of earnings; an individual will take home an additional $20. This is only for 2011 and the employer still pays the full 6.2% employer portion.

3. Patches for Alternative Minimum Tax (“AMT”) were included for 2010 and 2011. In 2010 AMT exemptions will be $47,450 for unmarried individuals and $72,450 for married individuals filing jointly. In 2011, these amounts are set to be $48,450 and $74,450, respectively.

4. Extension of 100% bonus depreciation for business property acquired between September 8, 2010 and January 1, 2012, subject with certain limitations.

5. Important to the elderly, temporary reinstatement of the estate tax of 35% with $5 million exemption.

6. Certain credits and deduction extensions including but not limited to: increased standard deductions for those married and filing jointly, child tax credits, earned income credits, and child dependency credits.

Although there is approximately only one week until the end of the year, there is still plenty of time to make some tax saving moves prior to then. To determine how the new tax law affects your particular situation, contact dbbmckennon today.