Thursday, December 2, 2010

Perlmutter Votes for $1.5 Trillion in Tax Relief for Hardworking People in the Middle

Today, U.S. Rep. Ed Perlmutter voted to give $1.5 trillion in important tax relief for 98% of all Americans including the hardworking people and businesses in the 7th Congressional District.

Perlmutter stated, “I am going to continue fighting hard to make sure there are tax cuts for everyone up to the first $250,000 in income for those filing jointly. It is important for our middle income earners, families and small businesses to have the certainty that they are protected and will have this tax relief. This tax relief will ensure we can focus on adding good jobs here in our country and get people back to work so we can have a strong and stable economy again. “I urge the Senate to reject a Republican plan to give a $700 billion, deficit busting gift to millionaires and billionaires and leave our kids the bill. The Senate needs to act quickly to provide critical tax relief needed by individuals, families and small businesses throughout the country.”

Below is a summary of the tax cuts passed in the House today.

I. EXTENSION OF ALTERNATIVE MINIMUM TAX RELIEF

Two-year extension of alternative minimum tax relief. The bill would extend AMT relief for nonrefundable personal credits and increasing the AMT exemption amount to $72,450 for joint filers and $47,450 for individuals in 2010 and 2011. This will protect more than 25 million families from the AMT.

II. EXTENSION OF THE 2001 AND 2003 TAX CUTS

Permanent extension of marginal individual income tax rate reductions for middle-class taxpayers. The bill would permanently extend the current 10%, 25% and 28% rate brackets. It also permanently extends the 33% rate bracket to the extent that this bracket applies to income of $200,000 or less for single filers ($250,000 or less for joint filers).

Permanent reduced capital gains and dividend tax relief for middle-class taxpayers. The bill would make permanent the temporarily reduced rates on capital gain and dividend income for taxpayers with adjusted gross income up to $200,000 for single filers and adjusted gross income up to $250,000 for married couples filing jointly. The bill would maintain the current 15% rate for middle-class taxpayers. For taxpayers with income above $200,000 ($250,000 for married couples filing jointly), the capital gains rate would revert to the pre-tax cut rate of 20%, and the dividend rate would revert to the pre-tax cut ordinary income rates.

Permanent extension of enhanced small business expensing. The bill would make permanent the increased small business expensing amounts. In order to help small businesses quickly recover the cost of certain capital expenses, small business taxpayers may elect to write-off the cost of these expenses in the year of acquisition in lieu of recovering these costs over time through depreciation. The bill would provide that small business taxpayers be allowed to write-off up to $125,000 (indexed for inflation) of capital expenditures subject to a phase-out once capital expenditures exceed $500,000 (indexed for inflation).

Permanent extension of EGTRRA and ARRA improvements to child tax credit. EGTRRA doubled the value of the child tax credit from $500 to $1,000, allowed the child tax credit to be claimed against the alternative minimum tax, and enhanced the refundable child tax credit. The American Recovery and Reinvestment Act of 2009 (“ARRA”) further enhanced the refundable child tax credit by allowing taxpayers to begin claiming the refundable credit once the taxpayer has received $3,000 of earned income (e.g., wages, tips, salaries). The bill would permanently extend these enhancements.

Permanent extension of PEP and Pease relief for middle-class taxpayers. Prior to 2010, certain taxpayers were subject to limitations on the amount that they could claim with respect to itemized deductions (the “Pease” limitation) and personal exemptions (the “PEP” limitation). These limitations reduced the value of itemized deductions and personal exemptions based on the amount that the taxpayer’s adjusted gross income exceeded a specific threshold. The bill would permanently set the threshold at which these limitations apply so taxpayers with adjusted gross income under $200,000 ($250,000 for a married couple filing jointly), adjusted for inflation, would not be subject to these limitations.

Permanent marriage penalty relief for middle-class taxpayers. A “marriage penalty” exists when the combined tax liability of a married filing a joint return is greater than the sum of the tax liabilities of each individual computed as if they were not married. Among other things, EGTRRA increased the basic standard deduction for a married couple filing a joint return to twice the basic standard deduction for an unmarried individual filing a single return and also increased the size of the 15% regular income tax bracket for a married couple filing a joint return to twice the size of the corresponding rate bracket for an unmarried individual filing a single return. The bill would permanently extend this tax relief.

Permanent earned income tax credit simplification and increase. The bill would permanently retain provisions to simplify the definition of earned income; simplify the relationship test, simplify the tie-breaking rule; provide additional math error authority for the IRS; repeal the prior-law provisions that would reduce an taxpayer’s earned income tax credit by the amount of the taxpayer’s AMT liability; and increase the beginning and ending points of the credit phase-out for married taxpayers. The bill would also make permanent the provision that increases the beginning point of the phase-out range for all married couples filing a joint return (regardless of the number of children) by $1,880.

Permanent extension of education tax incentives. The bill would make permanent modifications to education tax incentives including the deduction of student loan interest (maximum of $2,500) for single filers with adjusted gross income up to $75,000 and married couples filing jointly with adjusted gross income of $150,000; allowance of up to $2,000 in contributions per beneficiary to a tax-preferred Coverdell education savings account for qualified education expenses; and extensions of tax-preferences for certain bond-financing mechanisms for education facilities.

Permanent extension of tax benefits for families and children. The bill would make permanent tax benefits for families and children including: the maximum $13,170 adoption tax credit (as well as the maximum exclusion of $32,170 per eligible child), the employee tax credit for employee child care (25 percent of qualified expenses for employee child care and 10 percent of qualified expenses for child care resource and referral services), and the increased dependent care tax credit (35% of up to $3,000 of eligible expenses for one qualifying individual up to $1,050, and 35% of up to $6,000 of eligible expenses for two or more qualifying individuals up to $2,100).

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