On Dec 17,2010, The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (H.R. 4853) was finally enacted.

Here are some of the key provisions related to individuals:
A.  Extension of provisions which had expired as of Dec, 31, 2009, with references to IRC sections:
  • State and local sales tax as itemized deduction  Sec. 164
  • Higher education tuition deduction  Sec. 222
  • $250 teacher’s classroom expense deduction. This is a for AGI or above-the line deduction. Sec.  62(a)(2)(D).
  • Charitable contributions of IRA (although there's a question how this will help taxpayers who have already taken their RMD for 2010)  Sec 408(d)(8)

Note: The additional standard deduction for property tax was not extended.  Also the new vehicle sales tax deduction was for 2009 only.

B. Extension of provisions expiring in 2010.  These expire in 2011 unless otherwise noted below.  

  • 2010 individual tax rates (max of 35% through 2012)
  • 2010 rates on dividends and capital gains (max 15% through 2012)
  • No phaseout of itemized deductions or personal exemptions
  • Increased standard deduction and 15% bracket for married couples
  • $1,000 Child Tax Credit will continue (instead of reverting to $500)
  • Earned Income Tax Credit enhancements
  • Maximum expenses for the Child and Dependent Care Credit remain at $3,000/$6,000
  • Treatment of mortgage insurance premiums as interest Sec.163(h)(3)(E)
  • American Opportunity Tax Credit
  • Exclusion for employer educational assistance
  • Student loan interest deduction
  • Increased contributions to Coverdell Education Savings Accounts
  • Adoption Credit and exclusion for employer adoption assistance

C. Alternative Minimum Tax (AMT)

The bill provides an AMT patch. The exemption amounts for 2010 and 2011 are:


 

2010

2011

Single/Head of Household

$47,450
$48,450
Married filing joint/surviving spouse
$72,450
$74,450
Married filing separate
$36,225
$37,225

Nonrefundable personal credits can be applied against AMT for two more years.  Without extension the AMT exemption amounts would be lower.

D. Estate Tax

The law temporarily reinstates the estate tax, with an estate tax rate of 35% and an estate tax exemption of $5 million (adjusted for inflation after 2011).  For 2010 an estate may elect to 

E. Social Security

For 2011  the bill reduces the rate for the Social Security portion of payroll taxes to 10.4%, by reducing the employee rate from 6.2% to 4.2% (the employer’s portion remains at 6.2%).  This provision is effective for 2011 only.