New Tax Law, Revisited.

By now you’re likely somewhat familiar with the main highlights of the 2010 Tax Relief Act since it’s garnered so much media attention and CRI issued a brief overview. If not, please be sure to review CRI’s take on the Act by clicking here.

So how will this law affect you? Mainly, through extension of tax cuts and a revision to the estates and gifts, this tax bill may be your personal version of a money tree in 2011.

Tax Cuts

The biggest part of the bill, of course, is the two-year extension of current Bush-era tax cuts. The six federal income tax rates will remain at the same levels they are today: 10%, 15%, 25%, 28%, 33% and 35%.

The projected tax rates for 2011 under the 2010 Tax Relief Bill are:

SINGLE INDIVIDUALS

If taxable income is:	The tax will be:
Not over $8,500	10% of taxable income
Over $8,500 but not over $34,500	$850.00 plus 15% of the excess over $8,500
Over $34,500 but not over $83,600	$4,750.00 plus 25% of the excess over $34,500
Over $83,600 but not over $174,400	$17,025.00 plus 28% of the excess over $83,600
Over $174,400 but not over $379,150	$42,449.00 plus 33% of the excess over $174,400
Over $379,150	$110,016.50 plus 35% of the excess over $379,150

 

MARRIED COUPLES FILING JOINTLY

If taxable income is:	The tax will be:
Not over $17,000	10% of taxable income
Over $17,000 but not over $69,000	$1,700.00 plus 15% of the excess over $17,000
Over $69,000 but not over $139,350	$9,500.00 plus 25% of the excess over $69,000
Over $139,350 but not over $212,300	$27,087.50 plus 28% of the excess over $139,350
Over $212,300 but not over $379,150	$47,513.50 plus 33% of the excess over $212,300
Over $379,150	$102,574.00 plus 35% of the excess over $379,150

Combined with a payroll tax cut, the extension of the individual rate cuts offers many income earners the opportunity to pick a few leaves from the money tree in 2011. For example, depending upon the individual’s filing status, a taxpayer earning $50,000 in 2011 will see an approximate tax savings of close to $2,000 in combined income tax and payroll tax reductions.

Estates & Gifts

Another significant item covered in this Tax Bill is a major revision to the taxation of estates and gifts. The estate tax has been reinstated for 2011 but the exclusion has been raised higher than ever before to $5 million, and the maximum tax rate is now 35%.  Additionally, the gift tax exclusion has been reunified with the estate tax so that same $5 million applies for lifetime gifts as well.

For more details, review the full article we have posted on our website, "Congress Passes Two-Year Extension of the Bush-Era Tax Cuts." Here at CRI we’ll be busy fertilizing that money tree by continuing to study the bill in detail, assessing how you may best benefit from it, and sharing these insights with you in the future.