Tax Cut Bill: A Guide to the Extensions, Cuts and Credits
Reductions in Individual Income Tax Rates:
- Lower tax rates for taxpayers regardless of income.
- 10% Tax Bracket - Extends through 2012 the 10% individual tax bracket, the lowest tax rate for those individuals making up to $8,500 and married couples making up to $17,000. If the tax cut extension is not approved the 10% tax rate increases to 15%.
- 25%, 28%, 33% and 35% Tax Bracket - Extends through 2012 the current tax brackets that are set to expire at the end of 2010. The top tax rate 35% applies to those individuals making over $379,150 annually. If the tax cut extension is not approved the 35% tax rate would increase to 39.6%.
- Temporarily Repeals Itemized Deduction Limitation - extends repeal of itemized deduction limitation for two years for high income earners.
Payroll Tax Holiday:
- Through 2011, employees who pay 6.2 percent Social Security tax on wages earned up to $106,800 will get a temporary payroll tax holiday of two percentage points decreasing their contribution to 4.2 percent on wages earned. Self-employed individuals will receive a reduction in payroll self-employment tax from 12.4 percent to 10:4 percent.
Capital Gains and Dividends:
- Temporarily extends the capital gains and dividends rates - extends current capital gains and dividend rates for all taxpayers for two years through 2012 resulting in lower taxes. Current rates are zero percent for those taxpayers below the 25% tax bracket and 15% for those taxpayers 25% tax bracket and above. If the tax provisions expire the capital gains tax rates become 10% and 20% respectively. Dividends will be taxed at ordinary income tax rates.
- Lowers the estate tax for two years - the proposal allows estates of $5 million per person and $10 million per couple to pass to heirs tax free through 2012. Amounts over $5 million and $10 million would be taxed at the 35% tax rate.
Marriage Penalty Relief
- Temporarily extends the expiring increase in the standard deduction for married couples.
- Temporary Extension of Unemployment Benefits:
- Allows for one year extension of federal unemployment insurance benefits and emergency unemployment compensation benefits.
What else is included in the tax cut bill?
- Biodiesel and renewable diesel - extends through 2011 the $1.00 per gallon production tax credit for biodiesel.
- Energy-Efficient new homes credit - extends through 2011 tax credit for manufacturers of energy efficient residential homes.
- Alternative fuels credit - extends through 2011 the $.50 (cents) per gallon alternative fuel tax credit.
- Ethanol - extends through 2011 the per gallon tax credits for ethanol. Includes existing $.54 (cents) tariff on imported ethanol.
- Energy Efficient Appliances - extends through 2011 tax credit for manufacturers of energy-efficient large appliances.
- Elementary and Secondary school teachers - extends the $250 deduction for out of pocket classroom expenses for teachers.
- Deduction of State and Local General Sales Tax - extends itemized deduction for state and local sales tax in lieu of state income tax deduction.
- Deduction for qualified tuition and related expenses - extends tax deduction for qualified education expenses.
- Mass Transit Benefit - extends tax break for commuters who use mass transit. Allowing individuals tax free dollars for commuting on mass transit.
- Child Tax Credit - More generous $1000 child tax credit.
- Earned Income Tax Credit (EITC) - More generous EITC for low income families.
- Research and Development - extends Research and Development (R&D) capital expense tax credit for businesses.
- Railroad Track Maintenance Credit - extends through 2011 tax credit for railroad track maintenance.
- Mine Rescue Team Credit - extends through 2011 tax credit for training mine rescue team members.
- Mine Safety Equipment - extends 50 percent bonus depreciation for certain qualified underground mine safety equipment.
- Real Estate Development - extends through 2011 tax breaks for capital improvements to restaurants and other retail buildings.
- Motorsports Entertainment complexes (NASCAR) - extends through 2011 tax breaks for capital improvements land and support facilities at motorsports entertainment complexes.
- Food Inventory - extends through 2011 provision allowing business an enhanced charitable deduction for contributions of food inventory.
- Film and TV Expenses - extends through 2011 provision allowing film and TV productions to expense first $15 million of those production costs incurred in the United States. ($20 million if incurred in an economically depressed area in the U.S.)
- Empowerment Zones - extends through 2011 designation of certain economically depressed areas as empowerment Zones. Businesses and individual residents within empowerment zones are eligible for special tax incentives.
John Nolen is a CBS News Capitol Hill Producer. You can read more of his posts in Hotsheet here.
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