More On Tax Planningfrom The Advisor's Professional Library
- Long Term Care Insurance: Premiums While premiums for qualified long-term-care insurance may be deductible as medical expenses there are exceptions to this general rule. Learn how to avoid unnecessary tax liabilities.
- IRAs: In General Individual Retirement Accounts are highly popular tools for contributing funds that grow on a tax deferred basis. Depending on the type of IRA, the accumulation can be tax free.
The Senate began to debate on Thursday evening the $898 billion bipartisan tax cut bill that was introduced by Senate Majority Leader Harry Reid, D-Nev., earlier in the day. Reid’s bill, The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010,pretty closelyaligns with President Barack Obama’stax cut deal with Republican leaders, unveiled on Dec. 7.
While House Democrats have voice their opposition to the Senate bill, the likelihood is that the Senate’s compromise bill will eventually get passed by both House and Senate Democrats. Published reports have said a test vote on the Senate bill is scheduled for Monday, Dec. 13.
In a statement, Sen. Reid said that he “refused to let Republicans delay tax cuts for the middle class and small businesses any longer. This bill is not perfect, but it provides the economic boost middle-class families and small businesses in Nevada and across America need,” He continued: “The time for Republican political games is over. We must pass this measure before Congress adjourns.”
The Senate compromise bill includes the following provisions:
- Extends Alternative Minimum Tax (AMT) relief for two years. Currently, a taxpayer receives an exemption of $33,750 (individuals) and $45,000 (married filing jointly) under the AMT. Current law also does not allow nonrefundable personal credits against the AMT. The Senate proposal increases the exemption amounts for 2010 to $47,450 (individuals) and $72,450 (married filing jointly) and for 2011 to $48,450 (individuals) and $74,450 (married filing jointly). The Senate proposal also allows the nonrefundable personal credits against the AMT. The proposal is effective for taxable years beginning after December 31, 2009.
- As for the estate tax, the Senate bill sets the exemption at $5 million per person and $10 million per couple and a top tax rate of 35% for the estate, gift, and generation skipping transfer taxes for two years, through 2012.
- Extends by two years the current tax rate for middle class families.
- Includes a $120 billion payroll tax reduction for workers.
- Extends unemployment insurance benefits for 13 months.
- Extends the American Opportunity Tax Credit (college tuition), the Child Tax Credit and the Earned Income Tax Credit.
- Allows businesses to deduct 100% of certain investments in the first year.
- Extends for two years the state and local sales tax deduction.
- Extends the capital gains and dividends rates through 2012.
A blog posting on WhiteHouse.gov cited comments President Obama made on Dec. 9 regarding the “bipartisan framework” that he forged with the GOP on taxes. He said the deal “will not only protect working Americans from seeing a major tax increase on January 1st; it will provide businesses incentives to invest, grow and hire.”
Every economist that Obama’s talked with or “I’ve read over the last couple of days,” he continued, “acknowledges that this agreement would boost economic growth in the coming years and has the potential to create millions of jobs. The average American family will start 2011 knowing that there will be more money to pay the bills each month, more money to pay for tuition, more money to raise their children. But if this framework fails, the reverse is true.”