4897 Buford Hwy, Ste 222 ......................... Làm thuê hay triệu phú

Atlanta, GA 30341-3669.............................. Đời đối xử công bình

Tel (770) 696-1189 .................................... Muốn được đời tưởng thưởng

Fax (770) 696-1587 ................................... Hãy đòi hỏi chính mình ..............(someone wrote this)

http://www.LocThaiCPA.com ....................Email: LocThaiCPA@gmail.com

Monday, July 25, 2011

Tax Relief Act of 2010 for Individuals - Update

 .

Reduced Rates on Ordinary Income Extended through 2012

The new law extends through 2012 the now-familiar 10%, 15%, 25%, 28%, 33%, and 35% federal income tax rates on ordinary income. Without this change, the rates for 2011 and beyond would have been 15%, 28%, 31%, 36%, and 39.6%. [See IRC Sec. 1(i).]

Reduced Rates on Long-Term Gains and Dividends Extended through 2012

The new law also extends through 2012 the now-familiar 0% and 15% federal income tax rates on most long-term capital gains and dividends. Without this change, the rates in 2011 and beyond on most long-term capital gains would have been 10% or 20%, and dividends would have been taxed at ordinary income rates of up to 39.6%. [See IRC Sec. 1(h).]

One-Year Social Security Tax Cut for 2011 Only

For 2011, the new law reduces the 6.2% Social Security tax withholding rate on employee salaries from 6.2% to 4.2%. This temporary change affects 2011 wages up to the $106,800 Social Security tax ceiling. Therefore, an unmarried individual can save up to $2,136 (2% × $106,800) and a married couple can save up to $4,272 (2% × $106,800 × 2). The IRS has released revised 2011 payroll tax withholding tables to reflect this change. Similarly, the Social Security tax component of the self-employment tax for 2011 is reduced from 12.4% to 10.4%. [See IRC Secs. 3101(a), 3201(a), 3211(a), and 1401(a).]

Favorable Child Credit Rules Extended through 2012

The new law extends the $1,000 maximum credit amount through 2012. Otherwise, it would have dropped to only $500 for 2011 and beyond.

American Opportunity Education Credit Extended through 2012

The Economic Recovery and Reinvestment Act of 2009 (better known as the Stimulus Act) created the American Opportunity credit which can be worth up to $2,500, can be claimed for up to four years of undergraduate study, and is 40% refundable. The credit was scheduled to expire at the end of 2010 and be replaced by the Hope Scholarship credit which is smaller, can only be claimed for the first two years of undergraduate study, is subject to phase-out at lower income levels, and is 100% nonrefundable. The new law extends the more-generous American Opportunity credit through 2012. [See IRC Sec. 25A(i).]

College Tuition Write-off Extended through 2011

This deduction can be up to $4,000 annually at lower income levels or up to $2,000 at higher income levels. It expired at the end of 2009. The new law retroactively restores it for 2010 and extends it through 2011. (See IRC Sec. 222.)

Favorable Student Loan Interest Rules Extended through 2012

This deduction can be up to $2,500 annually, whether the taxpayer itemizes or not. Less-favorable rules were scheduled to kick in for 2011 and beyond. Specifically, a 60-month limit on deductible interest would have applied, and stricter phase-out rules would have reduced or eliminated write-offs for many middle-income households. The new law extends through 2012 the more-favorable rules established by the 2001 Bush tax cut legislation. (See IRC Sec. 221.)

Favorable Coverdell Education Savings Account Contribution Rules Extended through 2012

Before the new law, the maximum contribution to federal-income-tax-free Coverdell education savings accounts (CESAs) was scheduled to drop to only $500 for 2011 and beyond (down from $2,000). In addition, the stricter phase-out rule would have reduced or eliminated contributions for many married joint-filing couples. The new law extends through 2012 the more-generous CESA contribution rules established by the 2001 Bush tax cut legislation. (See IRC Sec. 530.)

Section 127 Educational Assistance Plans Extended through 2012

For the last few years, employers have been allowed to provide up to $5,250 in annual federal-income-tax-free educational assistance to each eligible employee under Section 127 plans. Both undergraduate and graduate school costs can be covered by Section 127 plans, and the education need not be job-related. Employers can deduct the cost of running their plans as an employee benefit expense. Section 127 plans were scheduled to expire at the end of 2010, but the new law extends them through 2012. (See IRC Sec. 127.)

Itemized Write-off for State and Local General Sales Taxes Extended through 2011

For the last few years, individuals who paid little or no state income taxes were given the option of claiming an alternative itemized deduction for state and local general sales taxes. The option expired at the end of 2009, but the new law retroactively restores it for 2010 and extends it through 2011. [See IRC Sec. 164(b)(5)(I).]

Liberalized Earned Income Credit Rules Extended through 2012

The Economic Recovery and Reinvestment Act of 2009 (better known as the Stimulus Act) increased the earned income credit (EIC) percentage for families with three or more qualifying children from 40% to 45% for 2009 and 2010. The Stimulus Act also increased the income threshold for the phase-out rule that can reduce or eliminate EICs for married joint-filing couples for 2009 and 2010 (the threshold was made $5,000 higher than the threshold for singles). These changes resulted in larger EICs for affected families, but they were scheduled to expire at the end of 2010. The new law extends the changes through 2012. [See IRC Sec. 32(b)(3).]

Favorable Dependent Care Credit Rules Extended through 2012

For the last few years, parents could claim a credit of up to $600 for costs to care for one under-age-13 child or up to $1,200 for costs to care for two or more under-age-13 kids so both parents can work. Lower-income parents could claim larger credits of up to $1,050 and $2,100, respectively. For 2011 and beyond, the maximum credit amounts were scheduled to drop to only $480 and $960, respectively, or $720 and $1,440 for lower-income parents. The new law extends the larger maximum credit amounts through 2012. (See IRC Sec. 21.)

Smaller Credit for Energy-Efficient Home Improvements Extended through 2011

The Economic Recovery and Reinvestment Act of 2009 (better known as the Stimulus Act) expanded the Section 25C credit to cover up to 30% of 2009 and 2010 expenditures for energy-efficient insulation, windows, doors, roofs, and heating and cooling equipment in U.S. residences. The maximum credit for 2009 and 2010 combined was $1,500. The new law extends the Section 25C credit through 2011, but it dials back the credit percentage to only 10% and the maximum credit amount to only $500. The $500 credit limit is further reduced by any Section 25C credits claimed in 2006-2010. Therefore, many taxpayers who claimed credits in those years will be ineligible for 2011 credits. Finally, the new law imposes dollar limits on credits for certain types of improvements. For example, there is a $200 credit limit for windows. (See IRC Sec. 25C.)

$250 Write-off for K-12 Educators Extended through 2011

For the last few years, teachers and other eligible education personnel at K-12 schools have been allowed to deduct up to $250 of school-related expenses paid out of their own pockets - whether they itemized or not. The deduction expired at the end of 2009, but the new law retroactively restores it for 2010 and extends it through 2011. [See IRC Sec. 62(a)(2)(D).]

Mortgage Insurance Write-off Extended through 2011

Premiums for qualified mortgage insurance on debt to acquire, construct, or improve a first or second residence can potentially be treated as deductible qualified residence interest. This break was scheduled to expire at the end of 2010, but the new law extends it for one year to cover premiums paid through 2011. [See IRC Sec. 163(h)(3)(E).]

DC Homebuyer Credit Extended through 2011

This credit expired at the end of 2009, but the new law retroactively restores it for 2010 and extends it through 2011. (See IRC Sec. 1400C.)

2011 Inflation-Adjusted Individual Tax Parameters

In Rev. Procs. 2010-40 and 2011-12, the IRS announced many of the inflation adjusted tax figures that will apply for 2011. Here are some highlights.

   - The 2011 individual tax bracket breaks points are higher than for 2010, but only by modest amounts. For example, the beginning of the 25% bracket for married joint-filing couples in 2011 is $69,001 (up from $68,001 in 2010).

   - The 2011 personal exemption deduction is $3,700 (up from $3,650 in 2010).

   - The 2011 standard deduction amounts are $5,800 for singles and married individuals who use married filing separate status (up from $5,700 in 2010); $11,600 for joint-filing married couples (up from $11,400); and $8,500 for heads of households (up from $8,400).

   - The 2011 MAGI phase-out ranges for the Lifetime Learning higher education tax credit are $51,000-$61,000 for unmarried individuals (up from $50,000-$60,000 in 2010), and $102,000-$122,000 for married joint-filing couples (up from $100,000-$120,000).

   - The 2011 phase-out ranges for the American Opportunity higher education credit are fixed by statute at $80,000-$90,000 and $160,000-$180,000, respectively (unchanged from 2010).

   - The 2011 unearned income threshold for the Kiddie Tax is $1,900 (unchanged from 2010).

   - The 2011 annual gift tax exclusion is $13,000 (unchanged from 2010).



No comments:

Post a Comment