Congress has approved and the President quickly signed a multi-billion dollar tax cut package, the Tax Relief, Unemployment Insurance Re authorization and Job Creation Act of 2010 (2010 Tax Relief Act) (H.R. 4853).  The new law follows through on the framework agreed to on December 6 by President Obama and GOP leaders in Congress.  The 2010 Tax Relief Act extends the Bush-era individual and capital gains/ dividend tax cuts for all taxpayers for two years.

The bill provides the following major changes:

  1. A patch to the Alternative Minimum Tax (AMT) so that 21 million taxpayers will not be subject to AMT for 2009.
  2. A one year 2% payroll tax cut for the employee’s portion of Social Security taxes on a wage base of up to $106,800.  Self-employed individuals will pay 10.4% in Social Security taxes on self-employment income up to the threshold of $106,800, which is also a 2% rate reduction.
  3. For business owners, the 100% bonus depreciation has been extended through 2011 and the 50% bonus depreciation now applies for 2012.

The top Federal estate tax rate beginning January 1, 2011 will be 35% and an individual will be able to transfer $5,000,000 to his heirs free from Federal estate tax.  This change will expire on December 31, 2012.  On January 1, 2013, the estate rate will go to 55% and the amount exempt from estate tax will decrease from $5,000,000 to $1,000,000.

The tax law changes are numerous and taxpayers should seek professional assistance in the preparation of their 2010 tax returns.  Beware, of “off the shelf” tax software for 2010 tax returns, which may not include these December 2010 tax changes.

For a detailed 11 page tax briefing on the new tax law by CCH a Wolters Kluwer business, go to, click on the link for “Latest Tax Legislation Updates” and click on the December 17, 2010 updates. There is also a comprehensive on line copy of the 2012/2013 Tax Planning Guide.  The tax planning guide provides tax planning tips for individuals and business owners.  To find answers to your estate tax and elder law questions go to where William E. Hesch is the estate planning attorney who provides answers to your questions.