Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010

Former Federal Reserve Chairman Alan Greenspan deregulated the financial industry which led to industry corruption and the recession. Back in 2001 he agreed to the Bush tax cuts but now says that the all tax cuts should expire at the end of the year because the government needs the revenue and it can help reduce the federal deficit.

Well, fast forward to today and the tax cuts enacted by President George W. Bush may be extended for two years per an agreement between the Democrats and Republicans. The agreement called the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 is expected to create over 1,000,000 jobs and improve the economy. Here is a brief list of the tax cuts that may be extended if Congress agrees to the act:

1. Child tax credit up to $1,000 for lower income individuals

2. Earned Income tax credit

3. American Opportunity tax credit - college tuition tax credit of up to $2,500

4. 2% payroll tax cut for taxpayers

5. Estate tax reinstated at 35% only for estates over $5 million, estates less than $1 million will remain tax free

6. Preserve jobless benefits for 13 months

7. Businesses can expense 100% of their investments in 2011 retroactive to September 2010

8. Those who don’t pay federal income taxes will continue to receive a
refundable credit up to $1,000

9. The capital gains tax would remain at 15% for the highest earners, lower income individuals will continue to pay zero for capital gains and dividends

10. Mortgage insurance premium deductions can continue for individuals making less than $109,000 or married couples earning less than $54,500 each

11. The energy tax credits would continue for home energy efficient improvements and hybrid cars

Tax Cuts and How They Affect You

President Bush implemented tax cuts several years ago and some of those tax cuts you have enjoyed in the past will end this year.

Currently the standard deduction in 2010 for married couples is $11,400 which is twice that for single filers, $5,700. In 2011, the standard deduction for married tax filers will be reduced to approximately $10,000 which may cause higher taxes for lower and middle income couples.

There are currently 6 tax rate brackets as defined by the IRS: 10%, 15%, 25%, 28%, 33%, and 35%. A proposal is set in place to reduce the rate brackets to five: 15%, 28%, 31%, 36%, and 39.6% which will cause all Americans to pay more in taxes in 2011 if implemented.

The current federal rate on long-term capital gains (an increase in the value of an investment or real estate that gives it a higher worth than the purchase price and the gain is not realized until the asset is sold. A capital gain may be short-term or long-term and must be claimed on your taxes) is 15%.

In 2011, a phase-out rule could eliminate up to 80% of income for itemized deductions for charitable donations, state and local taxes and mortgage interest for those in the higher income brackets. The phase-out rules begin for those filers who have adjusted income over $170,000.

In 2011, another phase-out rule will cause some filers to lose out on personal exemption deductions if your adjusted gross income exceeds $250,000 for joint filers; $168,000 for single filers or $210,000 for head of household.

In 2011, the maximum rate on gains will increase to 20%. The maximum rate on dividends (a distribution of a portion of a company's earnings to its shareholders) will increase to 39.6%.

Filers in the 10% and 15% tax bracket get a break this year and get a 0% rate on long-term gains and dividends. However in 2011, they will pay 10% on long-term gains and 15% and 28% on dividends.

Be sure to visit the IRS website to learn about all the tax cuts and how they will affect you and your family to be sure you don't owe money at the end of the year and are not missing out on some deductions.