2011 Individual Tax Picture

The President and Congress agreed to extend the Bush tax cuts for two years in the "Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010" (the "Tax Relief Act of 2010").

	Tax Relief Act of 2010
	Rate After 2010
Dividends	15%
Long-Term Capital Gains	15%
	10%
Individual income Tax Rates	25%
	28%
	33%
	35%
Estate Taxes	Exemption of 5,000,000 and top rate of 35%
Social Security Payroll Taxes	4.2%
Gift Taxes	35% above $5m
Carried Interest	15%

Itemized Deduction Phase-Out: The Tax Relief Act of 2010 extends complete repeal of the limit on itemized deductions for two years, through December 31, 2012.

Personal Exemption Phase-Out: The personal exemption phase-out was gradually eliminated beginning in 2006 and then entirely repealed for 2010. The Tax Relief Act of 2010 extends repeal of the personal exemption phase-out for two years, through December 31, 2012.

15 Percent Tax Bracket for Married Couples Filing Jointly: The Tax Relief Act of 2010 extends the expanded 15 percent rate bracket for married couples filing a joint return for two years, through December 31, 2012.

More Incentives: Along with all these incentives, the Tax Relief Act of 2010 extends many popular but temporary tax breaks. Extended for 2011 and 2012 are:

• $1,000 child tax credit
• Enhanced earned income tax credit
• Adoption credit with modifications
• Dependent care credit
• Deduction for certain mortgage insurance premiums

The Tax Relief Act of 2010 also extends retroactively some other valuable tax incentives for individuals that expired at the end of 2009. These incentives are extended for 2010 and 2011 and include:

• State and local sales tax deduction
• Teacher's classroom expense deduction
• Charitable contributions of IRA proceeds
• Charitable contributions of appreciated property for conservation purposes

EDUCATION

The Tax Relief Act of 2010 extends for two years:

• Higher education tuition deduction
• Student loan interest deduction
• Exclusion for employer-provided educational assistance
• Enhanced Coverdell education savings accounts
• Special rules for certain scholarships

Estate Tax: The Tax Relief Act of 2010 revives the estate tax, but with a maximum estate tax rate of 35 percent with a $5 million exclusion. The revived estate tax is in place for decedents dying in 2011 and 2012. The Tax Relief Act of 2010 gives estates the option to elect to apply the estate tax at the 35 percent/$5 million levels for 2010 or to apply carryover basis for 2010. The Tax Relief Act of 2010 also allows "portability" between spouses of the maximum exclusion and extends some other taxpayer-friendly provisions originally enacted in 2001.