Soukup, Bush & Associates, CPAs, PC, Fort Collins, CO

 President Barack Obama submitted his American Jobs Act to Congress on September 12th. His proposal addresses extending some tax provisions that are currently set to expire at the end of 2011. As the end of the year quickly approaches we would like to give you an update on these expiring provisions and a few of the significant provisions of the proposed American Jobs Act. 

Obama's Tax Proposals
Tax Cuts

TCTemporary Payroll Tax Holiday Expansion

For 2012, the employee's portion of Social Security tax under the proposal would be decreased to 3.1% (this rate is a reduction from the 6.2% rate in 2010 and 4.2% rate in 2011 computed on the first $106,800 of a worker's wages). This tax relief proposal would result in approximately $3,000 of tax savings to a worker making $100,000 in wages. This also results in an equal amount of tax savings to the worker's employer. The tax on self-employed individuals would be reduced to 6.2% (10.4% in 2011).

 

Increased Payroll Tax Credit

From October 1, 2011, through December 31, 2012, a payroll tax credit would be available to offset most employers' portion of Social Security tax for an increase in their payroll due to adding new employees or increasing the wages of their current employees. For example, if an employer paid wages of $125,000 in the fourth quarter of 2011 and paid $100,000 of wages in the fourth quarter of 2010 the employer would be entitled to eliminate the employer's portion of Social Security taxes on the $25,000 of increased wages.

 

Work Opportunity Tax Credits: Long-term unemployed workers

A $4,000 tax credit would be available for employers who hire individuals who have been unemployed for at least six months. A similar credit of up to $5,600 would be available for hiring veterans.

Obama's Tax Proposals
Revenue Raisers

Limitation on Itemized Deductions and Exclusions

The above changes (and others in the bill) would be paid for in part by placing a 28% limit on itemized deductions on "high income taxpayers." This provision would apply to joint filers with over $250,000 of adjusted gross income ($200,000 for single taxpayers).

 
Expiring Tax Provisions 
Sand Timer 2

There are many tax provisions expiring at the end of 2011 without a Congressional extension. Here are some of the more commonly used provisions that you may want to take advantage of in 2011 before they expire!

 

Research Credit

Eligible for amounts paid or accrued for qualified research expenses before January 1, 2012.

 

Nonbusiness Energy Property Credit 

You may currently claim up to $500 of an income tax credit for purchases of certain qualified residential energy property and qualified residential energy efficient improvements. This credit will be eliminated for any property purchased and installed after December 31, 2011.    

 

100% Bonus Depreciation

Qualified property acquired and placed in service after September 8, 2010 and before January 1, 2012 is allowed a 100% depreciation deduction in the year it is placed in service. Going forward, for qualified property acquired and placed in service after December 31, 2011 and before January 1, 2013, a 50% bonus depreciation deduction will be allowed.

 

NOTE: President Obama proposed on September 12, 2011 to extend the 100% bonus deduction through the end of 2012.

 

General Sales Taxes

Through the end of this year, a person may elect to deduct state and local sales taxes as an itemized deduction, instead of deducting state and local income taxes. You may in 2011 make an election to deduct your actual sales taxes or use IRS published tables and then add to the amount from those tables the actual amount of your sales tax for certain "big-ticket" items - motor homes, boats, aircraft, homes and home building materials. The option to deduct sales taxes expires at the end of 2011.

 

15-year Asset Classification for Special Real Property

Real Estate Improvements, including: qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property placed in service after December 31, 2011 will no longer be eligible to have the accelerated depreciation treatment over 15 years. Instead, this property will now have to be depreciated over 39 years.

Please contact us with any questions you may have regarding the expiring tax provisions or the proposals in this email, or if you would like more information.

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