Alternative Minimum Tax patched for another two years as part of Tax Relief Act of 2010 (passed December 17, 2010)

You should definitely take a look at the provisions of the Tax Relief Act of 2010 to review how it may affect you – and in light of what you’ve learned this semester!  Once again at the 11th hour, the threshold determining where the Alternative Minimum Tax calculation starts to bind is temporarily adjusted so that the proportion of households affected does not jump dramatically (see this CBO brief for background).  A year-long payroll tax cut is included as well (see discussion from a personal finance perspective in NY Times) in this important legislation enacted just prior to the winter holiday break.  Deductibility of state and local general sales tax in lieu of state and local income tax is also extended for itemizers – which benefits those of us who live in non-income tax states.  In some sense, this could be viewed as a horizontal-equity enhancing provision since it treats households with similar incomes similarly regardless of whether their state of residence happens to choose to emphasize taxation on income or taxation on purchases.  PS – you don’t necessarily have to have kept all your receipts to claim state sales tax on your Federal return;  if you itemize you can choose to go by the standard amounts calculated by the IRS – consult the relevant IRS publications for more information.

See the text of the enrolled bill (PDF of public law not yet available but this is what the House and Senate passed).

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