The Senate has been as busy as Santa’s elves on Christmas Eve trying to pass their healthcare bill, even though most of the provisions won’t even go into effect until 2011 and 2014. In the meantime, they have tabled many important tax issues that will affect 2010.
Every year Congress promises an AMT fix, and every year they provide an AMT patch effectively postponing the issue to the following year. So far for 2010 we don’t even have an AMT patch. This means that the confusing and burdensome Alternative Minimum Tax could affect joint filing taxpayers making less than $50,000.
Other popular tax breaks, like the R&D credit and deductions for tuition, teacher supplies, and state sales tax, are set to expire in 2010 unless Congress acts to renew them. Seniors will see their Medicare Part B premiums increase as well due to Congressional inaction.
The House has moved on the Estate Tax to make 2009 levels permanent. The 2009 Estate Tax is 45% on the amounts over $3.5 million. In 2010 the Estate Tax will disappear altogether before being reinstated at 2001 levels the following year. The House moved to make the 2009 levels permanent, but don’t expect the Senate to take the bill up in the near future.
Although Congressional procrastination doesn’t help with tax planning, experts do believe that most of these tax provisions will be renewed retro-actively after the beginning of the year. Hopefully they will find the time to solve these outstanding issues before the end of the year when they will be faced with a whole new set of issues with the Bush tax cuts set to expire in 2011.