Estate Tax Relief Enacted, Tax Incentives Extended

Legislation providing numerous tax cuts and incentives sought by Farm Bureau and lowering federal estate taxes was signed into law by President Obama last month.

The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 sets the federal estate tax exemption at $5 million with a maximum rate of 35% for the next two years. Without Congressional action, the estate tax would have returned to pre-2001 levels with a $1 million exemption level and a 55% tax rate.

“Credit for this win goes to Farm Bureau members, who told their estate tax stories and contacted their members of Congress,” said Patricia Wolff, American Farm Bureau Federation tax specialist.

The new law also reinstates stepped-up basis and indexes the estate tax exemption for inflation. It provides for a spousal transfer of any unused estate tax exemption amount during 2011 and 2012.

In addition the new law extends for two years until 2012 the lower 15% capital gains tax rates for all taxpayers and lower income tax rates for all taxpayers. The maximum rate will continue at 35% instead of increasing to 39.6%

The law extends for two years until 2012 tax incentives for biodiesel. It extends until 2011 tax incentives for ethanol and the tariff on imported ethanol. It also extends until 2011 the alternative fuels credit fuel tax credit for liquid fuels derived from biomass and other sources.
Alternative Minimum Tax exemp-tion amounts are increased for 2010 and 2011.

Included in the new law are other tax cut provisions supported by American Farm Bureau which do the following:
-- Extends for two years higher Section 179 Small Business Expensing provisions (2011-2012);
-- Extends for two years the expanded child tax credit, expanded dependent care credit, marriage penalty relief, expanded earned income tax credit, expanded education tax incentive and expanded adoption tax credits (2011-2012);
-- Allows businesses to immediately deduct 100 percent of purchased property through 2011 and for 50 percent bonus depreciation in 2012; 
-- Extends for two years the additional standard deduction for real property taxes (2010-2011);
-- Extends for two years the deduction of State and local general sales taxes (2010-2011);
-- Extends for two years the provision encouraging contributions of conservation easements (2010-2011);
-- Extends for two years the above-the-line deduction for qualified tuition and related expenses (2010-2011);
-- Extends for two years the enhanced charitable deduction for contributions of food inventory (2010-2011);
-- Extends for two years the 50% credit for short line railroad maintenance (2010-2011);
-- Extends for two years special rules for paying Unrelated Business Income Taxes (2010-2011); and
-- Eliminates for two years the tax on Health Service Corp Scholarship program awards (2011-2012), a program that encourages medical professionals to practice in underserved areas.