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Watch these ’11 tax law changes

In December, President Barack Obama signed the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. Here’s a rundown of some key provisions.

Key Points

President Barack Obama signed into law more than 11 tax-law changes.

Individual tax rates didn’t change, but many credits were adjusted.

New estate-tax rules warrant a visit with your planning adviser.


Regardless of an individual’s income, the employee share of the Social Security tax withheld from wages will drop from 6.2% to 4.2%, up to the taxable wage ceiling of $106,800. A single taxpayer making $50,000 a year will save approximately $1,000 in Social Security taxes.

Favorable rates on capital gains and dividends remain. For 2010, long-term capital gains and qualified dividends are taxed at a maximum 15% — 0% for taxpayers in the lowest two brackets). The new law extends these low rates through Dec. 31, 2012.

For 2011, the estate tax exclusion amount will be $5 million. The maximum estate tax rate will be 35%. The new law also changes the gift tax, the generation-skipping tax and the rules involving asset tax basis. Consult with your estate planning adviser regarding the many implications.

The alternative minimum tax patch is applied again. The two-year patch expands exemption amount:

$72,450 for married joint-filing couples and surviving spouses for 2010, and $74,450 for 2011.

$47,450 for single individuals for 2010, and $48,450 for 2011.

$36,225 for married individuals filing separately for 2010, and $37,225 for 2011.

A higher child and dependent care credit will be available for two more years. For one dependent, the maximum credit is based on up to $3,000 of eligible care expenses. For two or more dependents, the credit base is on up to $6,000 of eligible expenses.

Tax credits for energy-efficient home improvements are extended another year. But, the credit percentage is reduced to 10%, with a $500 maximum.

Bonus depreciation doubles from 50% to 100% for qualified business assets placed in service between Sept. 9, 2010 and Dec. 31, 2011. For assets placed in service in 2012, 50% bonus depreciation will be available.

The valuable research tax credit was renewed retroactively. It expired at the end of 2009, but is now extended through Dec. 31, 2011. It’s available to companies that introduce new products, improve current products and develop or enhance their processes.

The Work Opportunity Tax Credit is extended through Dec. 31, 2011. It provides financial incentives for employers hiring workers from certain disadvantaged groups. It’s worth 40% of up to $6,000 of the worker’s first year of eligible wages. Note: Unemployed veterans and “disconnected youth” were not included.

The new law also extends many other incentives for businesses involving energy, disasters and charitable contributions.

For more details regarding your situation, consult with your tax adviser.

Information provided courtesy of Stambaugh Ness Business Consulting, headquartered in York, Pa.

Employer guidance on ’11 withholding

Employers must quickly get their systems in line to account for the 2% Social Security tax cut. Shortly after the new law passed, the Internal Revenue Service issued instructions and new withholding tables.

Employers should start using the new tables no later than Jan. 31, 2011, according to the IRS. For any Social Security tax over-withheld during January, employers should make an offsetting adjustment in workers’ pay as soon as possible, but no later than March 31, 2011.


This article published in the February, 2011 edition of AMERICAN AGRICULTURIST.

All rights reserved. Copyright Farm Progress Cos. 2011.