Popular Tax Provisions Expiring in 2010

10/14/2010

By Joseph M. Press, CPA, CFE

Unless Congress takes action by the end of 2010, a number of popular tax provisions are set to expire on December 31, 2010. These provisions affect almost all types of tax returns including individual, corporate, estate, and trust returns.

Here is a summary of those expiring tax provisions:

• Increase in Marginal Tax Rates for Individuals
  • For 2010, individual marginal income tax rates are 10, 15, 25, 28, 33, and 35 percent
  • After December 31, 2010, they will go to 15, 28, 31, 36, and 39.6 percent
• The phaseout of itemized deductions for high income earners will be reinstated
• Personal exemption phaseout for high income earners will be reinstated
• Standard deduction for married couples filing a joint return will be reduced compared to the standard deduction for filing single
• Child tax credit goes from $1,000 per child in 2010, to $500 per child in 2011
• Dependent care credit goes from $3,000 to $2,400 (double for married filing joint)
• Adoption credit will go from $13,170 in 2010 and 2011 (increased for 2010 and 2011 only by The Patient Protection and Affordable Care Act) to $5,000 in 2012
• Capital gains rates will go from 15% to 20% (18% for assets held over 5 years)
• Qualified dividend income will be taxed at the individual’s marginal rate, an increase from the flat 15% rate now in effect.
• Education assistance programs
  • Employers will no longer be able to deduct up to $5,250 of employee provided education expenses, and employees will have to take any such assistance into income
• Student Loan Interest Deduction
  • The income phaseout range will go down from 2010 levels and the 60-month rule will be reinstated that limits the number of months during which interest paid on a student loan is deductible
• The above-the-line deduction for higher education expenses will be eliminated
• Bonds
  • The amount of governmental bonds for public schools that small governmental units can issue in a calendar year starting in 2011 without being subject to the arbitrage rebate requirement decreases from $15 million to $10 million.
  • Exempt facility bonds cannot be used to finance the development and construction of “qualified public educational facilities” after December 31, 2010.
• Estate tax is restored to pre-2001 amounts
• Estate tax exclusion amount is reduced to pre-2001 levels
• Generation skipping transfer tax amounts are restored to pre-2001 levels

There are many bills pending in Congress that may affect some or all of these expiring provisions, but as of the date of this article none have passed, with the exception of the Small Business Jobs Act of 2010. That act increased the §179 expense limits from the planned $25,000 for 2010, to $500,000 for 2010 and 2011.