Federal Income Taxes - Top 10 Things To Like About The Tax Relief Act Of 2010

President Obama just signed into law the Tax Relief Act of 2010. The full name of this legislation is the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. But for purposes of this article, let's just call it the Tax Relief Act.

There are plenty of good things in this bill. Here are some of the highlights:

1. Personal income tax rates will remain the same for the next two years. If this bill had not been passed, individual tax rates would have increased on January 1, 2011 to 15, 28, 31, 36 and 39.6 percent. Instead, they will remain at the levels of 10, 15, 25, 28, 33, and 35 percent for 2011 and 2012.

2. Maximum capital gains tax rates will also remain unchanged for 2011 and 2012. The maximum rate of 15 percent (zero percent for folks in the 10 and 15 percent tax brackets) stays in effect instead of increasing to 20 percent (10 percent for those in the 15 percent bracket).

3. Maximum dividend tax rates also stay the same for the next two years - 15 percent rather than ordinary income tax rates.

4. The child tax credit of $1,000 is extended for the next two years, rather than returning to $500 per qualifying child.

5. The American Opportunity Tax Credit (a credit to offset qualified higher education expenses) remains in effect for 2011 and 2012.

6. Employers can continue to provide tax-free educational assistance to their employees up to $5,250 per year in 2011 and 2012.

7. Several tax breaks that had expired on December 31, 2009 have been extended for 2011 and 2012. These include the teacher's classroom expense deduction, the higher education expense deduction, and the state/local sales tax deduction.

8. The deduction for qualified mortgage insurance premiums has been extended for 2011.

9. The dependent care credit remains as is for the next two years.

10. Social Security taxes have been reduced by 2 percent for 2011. This reduction applies to both employees and the self-employed.

Of course, there's at least one thing to dislike about this bill - all these provisions are temporary. A few exist for only one year (2011). Most of them will expire at the end of 2012, and so in two years, we get to watch Congress and the President have yet another debate on what to do about tax rules that change repeatedly because our politicians created them that way. So enjoy these tax breaks while they last.