On December 17, 2010, President Obama signed into law the Tax Relief Act of 2010, PL 111-312 (known by its full name of "Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010"). This law extended most of the Bush Era tax cuts for another two years. In addition, some provisions were added that are a benefit to most Americans.

Most noteworthy are the following provisions, most of which will apply for the next two years:

  1. The Estate Tax Exemption: there were no federal estate taxes in 2010, but carryover basis applied to estates of 2010 decedents. Now, the estate, not the heirs, may electo to either follow the old law and carryover basis, or be subject to the new law which will limit the tax rate to 35% from 55% and increase the exemption to $5 Million, adjusted for inflation after 2011, from $1 Million in 2011 (and which was unlimited in 2010).
  2. The Generation Skipping Transfer Tax (GST): 0% in 2010, the rate will go to 35% for the next two years.
  3. Exemptions unused at the death of one spouse may be used when the other spouse dies.
  4. Estate and GMT tax returns for 2010 are due nine months after enactment of the new law which should make them due September 17, 2011.
  5. Individual Tax Rates: were to revert to 15%, 28%, 31%, 36% and 39.6%, but will be held for the next two years at 15%, 25%, 28%, 33% and 35%.
  6. Itemized Deductions and Personal Exemptions: the repeal of such phaseouts has been exteneded for the next two years.
  7. Social Security Tax Reduction: the portion individuals contribute to their own social security taxes will drop by 2% for 2011 only, which could save people as much as $2,000 each!
  8. Business Depreciation: 100% first year depreciation is extended through 2011.

There are many, many other less significant provisions which will affect many, but not all taxpayers, such as:

  • the increased standard deduction for married taxpayers filing jointly is extended for two years.
  • the $1,000 child tax credit will continue the next two years and not revert to $500.
  • the Earned Income Credit will have new starting and ending income points.
  • the broader child and dependent care credits will continue for two years.
  • the American Opportunity Tax Credit will continue for two years.
  • the 100% exclusion of gain from the sale of certain small business stock under Section 1202 is extended through 2011.
  • the employee education assistance exclusion is extended two years.
  • above the line student loan interest decuctions are continued two years.
  • Coverdell contribution levels are continued two years.
  • certain scholarship monies are excluded for the next two years.
  • certain school teachers will get to deduct expenses for classroom items purchased by them.

This is a typical tax law covering volumes of pages and covering hundreds, if not thousands, of additional items. While the above is a significant overview, it would benefit you to consult with your tax professional as you proceed to make your decisions in light of this new legislation.