The House of Representatives voted (277-148) late in the evening on December 16, 2010 to extend the 2001 and 2003 tax cuts for two (2) years. Earlier this week, the bill, which is currently entitled “The Middle Class Tax Relief Act of 2010” (S. Amdt. 4753 to H.R. 4853), passed the Senate by a vote of 81-19. President Obama is expected to sign this bill into law this afternoon.
This legislation reduces the estate tax rate to thirty-five percent (35%) and increases the exemption amount to $5 million for two (2) years. Further, this legislation reunifies the estate tax and the gift tax; therefore, the applicable exclusion amount for lifetime gifts made in 2011 and 2012 is $5 million. Additionally, the legislation extends bonus depreciation for this two year period. For property placed in service after September 8, 2010 and before January 1, 2012, the additional first year depreciation (commonly referred to as bonus depreciation) is equal to one hundred percent (100%) of the cost of qualified property. For property placed in service after December 31, 2011 and before January 1, 2013, the additional first year depreciation is equal to fifty percent (50%) of the cost of qualified property.
We will provide a more detailed analysis of some of the key provisions of the Middle Class Tax Relief Act of 2010 early next week.
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