http://www.rhodesmurphy.com Tax Law Changes for RHODES-MURPHY customers Child Tax Credit This is the header text Generally, taxpayers with income below certain threshold amounts may claim the child tax credit to reduce federal income tax for each qualifying child under the age of 17. The EGTRRA increased the credit from $500 to $1,000. The EGTRRA also expanded refundability. The amount that may be claimed as a refund was 15% of earnings above $10,000. The American Recovery and Reinvestment Act of 2009 provided that earnings above $3,000 would count towards refundability for 2009 and 2010. This proposal extends the current child tax credit for an additional two years, through 2012. 2010-11-17 09:01:00.000 Marriage Penalty Relief The proposal extends the marriage penalty relief for the standard deduction, the 15 percent bracket, and the EITC for an additional two years, through 2012. 2010-12-23 09:01:00.000 New Vehicle Tax Credit Buyers of new vehicles can deduct the sales tax paid on the purchase, even if they don’t claim sales taxes as itemized deductions. They can add the tax they pay to their standard deduction. This break applies to new cars, motor homes, light trucks and motorcycles purchased after February 16, 2009 and before January 1, 2010. Sales tax paid on the first $49,500 of cost qualifies. The benefit begins phasing out for married couples with AGIs over $250,000 and singles with adjusted gross incomes over $125,000, and is completely gone for single filers with adjusted gross income of $135,000 or more or joint filers with AGI of at least $260,000. Itemizers who elect to deduct state sales taxes in lieu of state income taxes get no benefit from this change because the auto sales tax is already included in the sales tax deduction. Itemizers who deduct state income taxes will get a separate deduction for auto sales taxes; non-itemizers will add the sales tax amount to their standard deduction amount. 2010-11-17 09:01:00.000 Incentives for Families and Children The dependent care credit allows a taxpayer a credit for an applicable percentage of child care expenses for children under 13 and disabled dependents. The EGTRRA increased the amount of eligible expenses from $2,400 for one child and $4,800 for two or more children to $3,000 and $6,000, respectively. The EGTRRA also increased the applicable percentage from 30 percent to 35 percent. The proposal extends the changes to the dependent care credit made by EGTRRA for an additional two years, through 2012. 2010-12-29 09:01:00.000 Incentives for Families and Children The EGTRRA provided employers with a credit of up to $150,000 for acquiring, constructing, rehabilitating or expanding property which is used for a child care facility. The proposal extends this provision for an additional two years, through 2012. 2010-12-23 09:01:00.000 Incentives for Families and Children Taxpayers that adopt children can receive a tax credit for qualified adoption expenses. A taxpayer may also exclude from income adoption expenses paid by an employer. The EGTRRA increased the credit from $5,000 ($6,000 for a special needs child) to $10,000, and provided a $10,000 income exclusion for employerassistance programs. The Patient Protection and Affordable Care Act of 2010 extended these benefits to 2011 and made the credit refundable. The proposal extends for an additional year, through 2012, the increased adoption credit amount and the exclusion for employer-assistance programs as enacted in EGTRRA. 2010-12-23 09:01:00.000 Earned Income Tax Credit (EITC) Under current law, working families with two or more children currently qualify for an earned income tax credit equal to 40% of the family's first $12,570 of earned income. The American Recovery and Reinvestment Act increased the earned income tax credit to 45% of the family's first $12,570 of earned income for families with three or more children and increased the beginning point of the phase-out range for all married couples filing a joint return (regardless of the number of children). This proposal extends for an additional two years, through 2012, the American Recovery and Reinvestment Act provisions that increased the credit for families with three or more children and increased the phase-out range for all married couples filing a joint return. 2010-12-17 09:01:00.000 Education Incentives Coverdell Education Savings Accounts are tax-exempt savings accounts used to pay the higher education expenses of a designated beneficiary. The EGTRRA increased the annual contribution amount from $500 to $2,000 and expanded the definition of education expenses to include elementary and secondary school expenses. The proposal extends the changes to Coverdell accounts for an additional two years, through 2012. 2010-12-17 09:01:00.000 Education Incentives An employee may exclude from gross income up to $5,250 for income and employment tax purposes per year of employer-provided education assistance. Prior to 2001, this incentive was temporary and only applied to undergraduate courses. The EGTRRA expanded this provision to graduate education and extended the provision for undergraduate and graduate education to the end of 2010. The proposal extends the changes to this provision for an additional two years, through 2012. 2010-12-23 09:01:00.000 Education Incentives Certain individuals who have paid interest on qualified education loans may claim an above-theline deduction for such interest expenses up to $2,500. Prior to 2001, this benefit was only allowed for 60 months and phased-out for taxpayers with income between $40,000 and $55,000 ($60,000 and $75,000 for joint filers). The EGTRRA eliminated the 60 month rule and increased the income phase-out to $55,000 to $70,000 ($110,000 and $140,000 for joint filers). The proposal extends the changes to this provision for an additional two years, through 2012. 2010-12-17 09:01:00.000 Education Incentives Scholarships for qualified tuition and related expenses are excludible from income. Qualified tuition reductions for certain education provided to employees are also excluded. Generally, this exclusion does not apply to qualified scholarships or tuition reductions that represent payment for teaching, research, or other services. The National Health Service Corps Scholarship Program and the F. Edward Hebert Armed Forces Health Professions Scholarship and Financial Assistance Program provide education awards to participants on the condition that the participants perform certain services. The EGTRRA allowed the scholarship exclusion to apply to these programs. The proposal extends the changes to this provision for an additional two years, through 2012. 2010-12-17 09:01:00.000 Temporary Individual Alternative Minimum Tax (AMT) Relief 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 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 proposal also allows the nonrefundable personal credits against the AMT. The proposal is effective for taxable years beginning after December 31, 2009. 2010-12-23 09:01:00.000 Temporary Estate Tax Relief The EGTRRA phased-out the estate and generation-skipping transfer taxes so that they were fully repealed in 2010, and lowered the gift tax rate to 35 percent and increased the gift tax exemption to $1 million for 2010. The proposal sets the exemption at $5 million per person and $10 million per couple and a top tax rate of 35 percent for the estate, gift, and generation skipping transfer taxes for two years, through 2012. The exemption amount is indexed beginning in 2012. The proposal is effective January 1, 2010, but allows an election to choose no estate tax and modified carryover basis for estates arising on or after January 1, 2010 and before January 1, 2011. The proposal sets a $5 million generation-skipping transfer tax exemption and zero percent rate for the 2010 year. 2010-12-28 09:01:00.000 Temporary Estate Tax Relief Under current law, couples have to do complicated estate planning to claim their entire exemption (currently $7 million for a couple). The proposal allows the executor of a deceased spouse's estate to transfer any unused exemption to the surviving spouse without such planning. The proposal is effective for estates of decedents dying after December 31, 2010. 2010-12-28 09:01:00.000 Temporary Extension of Unemployment Insurance The unemployment insurance proposal provides a one-year reauthorization of federal UI benefits. The proposal continues the Emergency Unemployment Compensation (EUC) benefits for one year. In addition, it continues 100% Federal Financing of Extended Benefits (EB) for one year, and makes changes to the EB look-back enabling states to continue to trigger on EB. 2010-12-29 09:01:00.000 Temporary Employee Payroll Tax Cut Under current law employees pay a 6.2 percent Social Security tax on all wages earned up to $106,800 (in 2011) and self-employed individuals pay a 12.4 percent Social Security self-employment taxes of on all their self-employment income up to the same threshold. The bill provides a payroll/self-employment tax holiday during 2011 of two percentage points. This means employees will pay only 4.2 percent on wages and self-employment individuals will pay only 10.4 percent on self-employment income up to the threshold. 2010-12-29 09:01:00.000 Temporary Extension of Certain Expiring Energy Provisions The biodiesel and renewable diesel bill extends through 2011 the $1.00 per gallon production tax credit for biodiesel, as well as the small agri-biodiesel producer credit of 10 cents per gallon. The bill also extends through 2011 the $1.00 per gallon production tax credit for diesel fuel created from biomass. 2010-12-29 09:01:00.000 Temporary Extension of Certain Expiring Energy Provisions The energy-efficient new homes bill extends through 2011 the credit for manufacturers of energy-efficient residential homes. 2010-12-29 09:01:00.000 Temporary Extension of Certain Expiring Energy Provisions The alternative fuels credit bill extends through 2011 the $0.50 per gallon alternative fuel tax credit. The bill does not extend this credit for any liquid fuel derived from a pulp or paper manufacturing process (i.e., black liquor). 2010-12-29 09:01:00.000 Temporary Extension of Certain Expiring Energy Provisions The energy-efficient appliances bill extends through 2011 and modifies standards for the Section 45M credit for US-based manufacture of energy-efficient clothes washers, dishwashers and refrigerators. 2010-12-29 09:01:00.000 Temporary Extension of Certain Expiring Energy Provisions The energy-efficient of existing homes bill extends through 2011 the credit under Section 25C of the Code for energy-efficient improvements to existing homes, reinstating the credit as it existed before passage of the American Recovery and Reinvestment Act. Standards for property eligible under 25C are updated to reflect improvements in energy efficiency. 2010-12-29 09:01:00.000 Individual Tax Relief This Individual Tax Relief bill extends for two years (through 2011) the $250 above-the-line tax deduction for teachers and other school professionals for expenses paid or incurred for books, supplies (other than non-athletic supplies for courses of instruction in health or physical education), computer equipment (including related software and service), other equipment, and supplementary materials used by the educator in the classroom. 2010-12-29 09:01:00.000 Individual Tax Relief The bill extends for two years (through 2011) the above-the-line tax deduction for qualified education expenses. 2010-12-29 09:01:00.000 Individual Tax Relief The extension of tax-free distributions from individual retirement plans for charitable purposes bill extends for two years (through 2011) the provision that permits taxfree distributions to charity from an Individual Retirement Account (IRA) of up to $100,000 per taxpayer, per taxable year. The bill allows individuals to make charitable transfers during January of 2011 and treat them as if made during 2010. 2010-12-29 09:01:00.000 Business Tax Relief Through the New Markets Tax Credit (NMTC) program, the federal government is able to leverage federal tax credits to encourage significant private investment in businesses in low-income communities. For each dollar of qualified private investment, the NMTC program provides investors with either five cents or six cents of federal tax credits (depending on the amount of time that has passed since the original investment was made). The bill extends for two years (through 2011) the new markets tax credit, permitting a maximum annual amount of qualified equity investments of $3.5 billion each year. This is effective for calendar years beginning after December 31, 2009. 2010-12-29 09:01:00.000 Business Tax Relief The employer wage credit for activated military reservists bill extends for two years (through 2011) the provision that provides eligible small business employers with a credit against the taxpayer's income tax liability for a taxable year in an amount equal to 20 percent of the sum of differential wage payments to activated military reservists. 2010-12-29 09:01:00.000 Business Tax Relief The tax benefits for certain real estate developments bill extends for two years (through 2011) the special 15-year cost recovery period for certain leasehold improvements, restaurant buildings and improvements, and retail improvements. 2010-12-29 09:01:00.000 Business Tax Relief The Business Tax Relief bill extends for two years (through 2011) the provision allowing S corporation shareholders to take into account their pro rata share of charitable deductions even if such deductions would exceed such shareholder's adjusted basis in the S corporation. 2010-12-29 09:01:00.000 Business Tax Relief Under current law, a taxpayer may itemize the cost of mortgage insurance on a qualified personal residence. The deduction is phased-out ratably by 10% for each $1,000 by which the taxpayer's AGI exceeds $100,000. Thus, the deduction is unavailable for a taxpayer with an AGI in excess of $110,000. The bill extends this provision for an additional year, through 2011. 2010-12-29 09:01:00.000 Business Tax Relief Under current law, a taxpayer may itemize the cost of mortgage insurance on a qualified personal residence. The deduction is phased-out ratably by 10% for each $1,000 by which the taxpayer's AGI exceeds $100,000. Thus, the deduction is unavailable for a taxpayer with an AGI in excess of $110,000. The bill extends this provision for an additional year, through 2011. 2010-12-29 09:01:00.000