Had no action been taken, all of the marginal tax rates would have risen in January, with the top rate jumping to 39.6%.
The tax package, estimated to cost $858 billion over 10 years, includes several positive provisions for NAHB members, as well as a couple of concerning aspects.
Specifically, according to NAHB, it will:
Reinstate the expired estate tax for two years at a rate of 35%. Adjusted for inflation, the first $5 million of an individual’s estate (indexed for inflation) would be passed on to heirs tax-free and couples could exempt $10 million of their estate’s value. While NAHB would prefer to see the estate tax eliminated, this was the best proposal that was offered. Except for the temporary repeal of the estate tax this year, the rate has not been lower than 45% since 1931. Without congressional action, the tax was scheduled to return next year with a top rate of 55% for estates larger than $1 million for individuals and $2 million for couples.
Provide an estimated 21 million middle-class households and small businesses relief from the Alternative Minimum Tax through 2011.
Maintain the current long-term tax rate on dividends and capital gains through 2012. The highest capital gains rate of 15% was expected to rise to 20% next year. Had no action been taken, dividend payments could have been taxed at a rate of as much as 39.6% for top earners.
Renew the New Energy Efficient Home Tax Credit (45L) for 2010 and extend it through the end of 2011.
Allow businesses to write off the full cost of capital investments (excluding residential and commercial buildings) after Sept. 8, 2010 and through the end of 2011.
Provide a 50% bonus depreciation in 2012.
Extend the expensing of brownfields remediation costs through 2011.
Eliminate the Pease itemized deduction phase-out through 2012. The Pease rule reduces the value of itemized deductions such as the mortgage interest deduction and the real estate tax deduction for high-income taxpayers.
Extend tax deductions in the Gulf Opportunity Zone for an additional 2 years beyond the placed-in-service date.
Extend the deductibility of Private Mortgage Insurance through 2011; however, the existing adjusted gross income limitation of $110,000 remains.