President Obama, the Republicans, and the Democrats are still negotiating, a tax compromise related to the George Bush tax cuts. Although legislation has not been formally introduced to the either the House of Representatives or the Senate yet, Administration and legislative sources have indicated the proposed tax compromise includes the following:
- A two-year continuation of all the 2001 and 2003 tax cuts.
- A patch to the alternative minimum tax to last two years.
- A number of other tax cuts will be continued including the earned income tax credit, the child tax credit and the American Opportunity Tax Credit
- Unemployment benefits will be extended for 13 months
- The employee share of Social Security tax will be reduced in 2011 from 6.20% to 4.20%. The employer side remains unchanged.
- The R&D tax credit and similar business expansion tax incentives will be extended for two years.
- The estate tax will be set at 35% and the universal exemption will be $5 million.
- Businesses will be able to write off 100% of their equipment and machinery purchases in 2011 and 50% of similar purchases in 2012. At present, it is not clear how narrowly or broadly the terms “equipment and machinery” will be defined.
House Democrats have resolved not to allow the compromise, as it currently stands, to come to floor for a vote. Senate Democrats seem more persuaded by the President’s position, but the above elements may change before all is said and done and the exact tax landscape for 2011 will not be certain until a bill is signed into law.
For more on tax planning and other tax law concerns, contact the Chicago tax lawyers at Horowitz & Weinstein.