Congress Appears Poised to Approve Tax-Cut Extension

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After the tax legislation compromise reached by President Obama and congressional Republicans last week, congressional Democrats voiced their displeasure, and the future of the potential legislation was not clear.  Today, we are getting a little clearer picture of what to expect over the next couple of years.

HR 4853 has been introduced in the Senate and a procedural vote is expected today, which could then move the bill into the House of Representatives, where opposition is seems a little more likely.  House Democrats are pushing for a raise in the estate-tax rates, as well as a reduction in the estate tax exemption.

Following is a summary of the major provisions of the potential legislation as it stands now:

– Continuation of current income and capital gains tax rates (35% maximum income tax, 15% maximum capital gains).

– AMT patch to set the AMT exemption amount at $47,450 for individuals and $72,450 for married individuals filing jointly for 2010, indexed slightly for 2011.

– Bonus depreciation and IRC 179 expensing on business property acquired after 9/8/10 and before 1/1/12.  The IRC 179 expensing limit would be set at $125,000 and phased out at $500,000 for 2012.  These amounts would then go to $25,000 and $200,000 after 2012.

– The Estate Tax rate would be 35% with an estate tax exemption of $5 million.  Estates of decedents dying in 2010 could elect the reinstated tax rate, or be subject to the modified carryover basis rule.

Many other detailed provisions would be extended as well, and those can be found at this article from the Journal of Accountancy here.

We will continue to monitor the status of this legislation and prepare and email a full report when it is finalized.

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