The Can Has Been Kicked
Friday, December 17, 2010 at 10:02AM As expected Congress sent a tax bill to the President that leaves the Bush tax cuts in place for another two years. This is good news if for no other reason it allows tax planners to forecast the tax costs of business plans for the near term.
I expect many business owners and advisors are as frustrated as I am that there is no clear tax policy coming out of Washington. Democrats, licking their wounds from November, followed a "lame duck" course of action and did the only sensible thing, which was essentially...nothing. I know, I know. "Doing nothing" would have meant the tax cuts would have expired.
That wasn't going to happen. On his worst day Chuck Rangle wasn't delusional enough to propose across the board tax hikes in the middle of a recession without realizing he'd be sticking a political gun in his mouth. The only real effect November had on this debate was that it stripped the Democrats of the political capital they needed to increase rates on incomes over $250,000.
Small business owners will be interested in the following provisions of the bill that is expected to be signed by the President shortly.
- If you're a small business owner with an estate and your NOT planning on cashing in your chips for a trip to the pearly gates this year you'll need to know that the estate tax will come back in 2011. The bill includes a $5 million exemption under the unified credit to be adjusted for inflation after 2011 and a 35% tax rate.
- There is a 100% bonus depreciation allowance for property placed in service after September 8, 2010. As before this only applies to new property. For profitable small businesses this isn't such a big deal since they have access to section 179 depreciation on up to $125,000. After 2012 we go back to $25,000 of 179 expense and no bonus depreciation.
- For 2011 only employees get a break on their Social Security taxes with a 2% reduction to 4.2%. Employers are still on the hook for 6.2%.
That's it. Pretty much everything else is an extension of the rules were were dealing with in 2010. Most important we will have the same tax rate structure and continuation of the 15% capital gains rate, at least for two more years.
Reader Comments (1)
Great write up! This is going on my blog, dang it!