No one knows yet what the tax landscape for 2011 will look like. That won’t become definite until a bill is signed into law. And although the climate in Washington is getting dicey, with House Democrats resolving not to let the compromise come to the floor as it currently stands, at the moment, here’s what the tax compromise includes:
- A two-year continuation of all the 2001 and 2003 tax cuts.
- A patch to the alternative minimum tax to last two years.
- A number of other tax cuts will be continued including the earned income tax credit, the child tax credit and the American Opportunity Tax Credit
- Unemployment benefits will be extended for 13 months
- The employee share of Social Security tax will be reduced in 2011 from 6.20% to 4.20%. The employer side remains unchanged.
- The R&D tax credit and similar business expansion tax incentives will be extended for two years.
- The estate tax will be set at 35% and the universal exemption will be $5 million.
- Businesses will be able to write off 100% of their equipment and machinery purchases in 2011 and 50% of similar purchases in 2012. At present, it is not clear how narrowly or broadly the terms “equipment and machinery” will be defined.
For more on tax planning and other tax law concerns, contact the Chicago tax lawyers at Horowitz & Weinstein.