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Major Tax Law Changes

Major Tax Law Changes. Peter J. Chudyk, CPA, JD Christopher B. Anderson, CPA. What We Will Cover. Provisions in the Small Business Jobs Act of 2010 (SBJA) Provisions of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 Update on other tax reporting issues.

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Major Tax Law Changes

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  1. Major Tax Law Changes Peter J. Chudyk, CPA, JD Christopher B. Anderson, CPA

  2. What We Will Cover • Provisions in the Small Business Jobs Act of 2010 (SBJA) • Provisions of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 • Update on other tax reporting issues

  3. SBJA of 2010 • Section 179 expensing changes, including certain real property • Extension of bonus depreciation • New 1099 reporting rules for recipients of rental income from real estate

  4. Section 179 Changes • SBJA increased amount to $500,000 from $250,000 • Phase-out increased from $800,000 to $2,000,000 (complete phase-out at $2,500,000) • For tax years 2010 and 2011

  5. Section 179 Changes • Qualifying property: depreciable tangible personal property used in trade or business • Includes off-the-shelf computer software • Election for certain depreciable real property

  6. Section 179 Changes • Certain depreciable real property: - Qualified leasehold improvements - Qualified restaurant property - Qualified retail improvement property • Be careful about what does and does not qualify

  7. Section 179 Changes • Qualified real property expense limit: $250,000 • Pro-rata allocation for real property and personal property • Carryover of real property deduction allowable only when real ppty. still included in Sec.179 definition

  8. Bonus Depreciation • 50% of basis of qualifying property can be expensed • Placed in service by 12/31/2010 • Generally, MACRS property with recovery period of 20 yrs or less - Certain other property qualifies • First use of property

  9. Tax Relief Act of 2010 • 100% bonus depreciation for certain property placed in service after 9/8/2010 and before 1/1/2012 • Thus, 50% for 1/1/10 to 9/8/10 and 100% for 9/9/10 to 12/31/11

  10. 1099 Reporting Changes • Trade or business payments of $600 or more to certain recipients • Beginning 1/1/2011, “trade or business” includes real property rental • Service providers like management company, plumbers, lawyers, etc.

  11. 1099 Reporting Changes • Payments to corporations are generally excluded (there are exceptions) until 2012 • 2012: payments of $600 or more to corporations for goods and services are reportable on Form 1099-MISC - Reporting done in 2013

  12. Other Provisions • Cell phones are no longer “listed property” - No tax effects for personal use - Logs no longer required - Effective 1/1/2010

  13. Tax Relief Act of 2010 • Extension of “Bush era tax cuts” for 2 years (2011 and 2012) - Top individual tax rate: 35% - Long-term cap. gain rate: 15% - Qualified dividends: 15% - AMT patch

  14. Tax Relief Act of 2010 • Extension of “Bush era tax cuts”: - Election of state sales tax deduction vs. state income taxes (2011) - Favorable phase-out rules for personal exemptions and itemized deductions extended

  15. Tax Relief Act of 2010 • Employee’s Social Security tax rate for 2011 reduced from 6.2% to 4.2% - Applies for Self Employment Tax also (from 12.4% to 10.4%) • New markets tax credit extended through 12/31/2011

  16. Estate Tax Update • Top estate tax rate: 35% for 2010, 2011 and 2012 • Exemption: $5 million (estate & gift) • Estate tax retroactively reinstated for 2010 unless estate makes special election • Election: carryover basis

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