Congress Passes 2010 Tax Relief Act

On Wednesday, December 15, the Senate passed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. Late on Thursday, December 16, the House also passed the Act, clearing the way for President Obama's signature on Friday, December 17.

Below are key provisions of the Act:

Income Tax Provisions

• Extend the current income tax rates for 2 years (including capital gains and dividend tax rates) for all taxpayers
• Repeal the personal exemption phase-out and itemized deduction limitations for 2 years
• Extend the marriage penalty relief for 2 years
• Extend a variety of child-related credits and educational incentives
• Provide AMT relief for 2010 and 2011
• Extend the $100,000 tax-free distribution from IRAs to charity for 2010 and 2011

Estate Tax Provisions

• Increase the estate and GST exemptions to $5,000,000 effective 1/1/10
• Retain the gift exemption at $1,000,000 for 2010 and then increase the gift exemption to $5,000,000 effective 1/1/11 (reunifying it with the estate and GST exemptions)
• Decrease the maximum estate tax rate to 35% effective 1/1/10
• Retain the maximum gift tax rate of 35%
• Retain the GST tax rate at 0% for 2010 and then set the maximum GST tax rate at 35% effective 1/1/11
• Provide portability of the estate exemption between spouses
• Allow 2010 estates to choose the new law or the current law (i.e. no estate tax but carryover basis)
• The above provisions are effective for two years, through 12/31/12
• The 10-year minimum GRAT term was not included in the Act

Payroll Tax Cut

• Provides a one-year reduction in the Social Security tax rate of 2% for both employees and self-employed individuals in 2011.

Please contact your Client Relationship Director for questions specific to your planning.

This information is not intended to serve as tax or legal advice. As always, tax and legal counsel should be engaged before taking any action.

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Headquartered in Indianapolis, Indiana, with offices in Chicago, Illinois; Grand Rapids, Michigan; and Cincinnati and Dublin/Columbus, Ohio, Oxford specializes in serving clients with portfolios greater than $2 million and a net worth above $5 million. Oxford also provides trust and custody services to its clients through The Trust Company of Oxford™. For additional information, call 800.722.2289 or visit ofgltd.com.