Payroll Tax Rate Reduction

Under current law, the Social Security portion of the tax imposed on employees under the Federal Insurance Contributions Act ("FICA") is 6.2%. Employers are also subject to a 6.2% rate for the Social Security portion of the FICA tax, and self-employed persons are subject to a rate of 12.4% for the Social Security portion of the tax imposed on self-employment income under the Self Employment Contributions Act ("SECA"). The maximum amount of compensation or earned income subject to the Social Security tax under FICA and SECA is $106,800 for both 2010 and 2011 (note that the other component of the tax imposed under FICA and SECA, the Medicare tax, is imposed at a total rate of 2.9% and has no ceiling).
Pursuant to the 2010 Act, the employee portion of the Social Security tax under FICA will be reduced from 6.2% to 4.2% for 2011. The 2010 Act also reduces the Social Security tax on self-employment income under SECA to 10.4% for 2011.

Current Provisions Extended Through December 31, 2012

• Marginal income tax rates for individual taxpayers of 10, 15, 25, 28, 33 and 35% remain in effect (if the Bush-era rates had expired, for 2011 the rates would have been 15, 28, 31, 36, and 39.6%)
• Qualified dividends taxed at a maximum rate of 15%
• Qualified long-term capital gains taxed at a rate of 15% (the rate will continue to be zero percent for taxpayers in the 10% or 15% income tax bracket, 25% for certain recaptured real estate gain, and 28% for certain items defined as "collectibles")
• No phase-out of the personal exemption (prior to 2010 the personal exemption was phased out at higher income levels)
• No limitations on itemized deductions (prior to 2010 itemized deductions were limited for higher-income taxpayers)
• Standard deduction for married couples filing joint returns is exactly twice the standard deduction for single individuals
• 15% tax bracket for married couples filing jointly is twice that for single individuals
• Employer-provided childcare credit
• $1,000 child tax credit
• Earned income tax credit
• Dependent care credit
• Adoption credit
• The American Opportunity Tax Credit (formerly called the Hope education credit)
• Exclusion from income for certain employer-provided educational assistance, as well as the related employer deduction for such educational assistance
• Student loan interest deduction and Coverdell education savings accounts

Current Provisions Extended Through December 31, 2011

• 15-year straight-line cost recovery for qualified leasehold improvements, restaurant buildings and improvements, and retail improvements
• Exclusion of 100% of gains from sale of small business stock
• Research and development credit
• Expensing of environmental remediation costs
• Modification of tax treatment of certain payments to controlling exempt organizations
• Basis adjustment to stock of S corporations making charitable deductions of property
• New markets credit (permits up to $3.5 billion in qualified equity investments for each of 2010 and 2011)
• Many energy incentives, including the new energy efficient home credit, the energy efficient appliance credit, the nonbusiness energy property credit, and the alternative fuel vehicle refueling property credit
• GO Zone tax incentives (rehabilitation credit, low-income housing credit, tax-exempt bond financing, and bonus depreciation extensions)
• New York Liberty Zone tax-exempt bond financing
• Empowerment zone tax incentives
• Tax incentives for investment in the District of Columbia
• Qualified zone academy bonds
• Alternative minimum tax ("AMT") patch
• State and local sales tax deduction
• Higher education tuition deduction
• Teacher's classroom expense deduction
• Tax-free distribution of IRA proceeds contributed to charity
• Charitable contribution of appreciated real property for conservation purposes
• The deduction of certain mortgage insurance premiums