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Tax Bill of December 2010 (12/22/2010)
By Richard Schneider

Emeritus Professor of Accounting

Tax Relief, Unemployment Insurance, Reauthorization, and Job Creation Act of 2010; this is a very long title giving a brief description of the contents. Some of the provisions are retroactive to January 1, 2010, and some start with 2011 and go forward for 1 to 2 years, only a couple of the provisions are permanent. Below are some of the provisions.

First those provisions that affect 2010 and are extended thru 2011:

K-12 teachers’ classroom expenses of $250.

Use of sales tax instead of state income tax as an itemized deduction.

Higher education costs as a deduction as an option to the education credit.

Tax free direct transfers from IRAs to charities.

Second the provisions set to expire December 31st, 2010 that are extended two years through 2012:

Enhanced child tax credit of $1,000 per child, a 2009 provision which allows a greater portion to be refundable.

American Opportunity Credit – higher education cost credit, also a 2009 provision, which allows an enhanced credit for the first 4 years of higher education.

The 2009 amendment to the earned income credit, that raised the income limits.

Bush era tax cuts extended for all income levels.

Other provisions: (some not all)

AMT (alternative minimum tax), fix for 2010 and 2011.

Estate tax: for 2011 and beyond, exemption raised to $5 million, adjusted for inflation, and a unified credit with the gift tax. The 2011 limits and rules maybe used for 2010 estates.

Unemployment benefits extended.

Tax Holiday for part of the social security and self employment tax. The tax rate is reduced by 2% for 2011 only, for the employee and employer. The lost revenue will be transferred from the general fund to the social security trust fund.

Tax credits of $25 to $225, for purchasing energy efficient dishwashers, clothes dryers, and refrigerators, manufactured in 2011.

Credits for energy efficient improvements to your home.

Remember your tax situation is most likely unique, and you should consult your tax professional, but give the person a couple of weeks to get up to speed. I am a believer in demand side economics to create jobs. If you create a demand for a product or service, business will respond by producing more, and hiring workers. Does this bill do the trick? Certainly some provisions put money in the hands of consumers, and consumers who are likely to spend the cash on consumable products, such as the extended unemployment benefits, and social security tax holiday.  


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