2011 Tax Law Changes: Part 1

Happy New Year! I truly hope you had a very Merry Christmas and a joyous New Year celebration! I hope that all of your wishes and dreams come true in 2012!

Tax season is ready to begin on January 9, 2012. There are several new tax laws in place and a few changes for the 2011 tax filing year.

Laundry List of 2011 Tax Law Changes - Part 1

Tax Credits:

Child Tax Credit The child tax credit was going to drop from $1,000 per child to $500; however, that drop is delayed until 2013. The credit is still refundable for certain filers.

Payroll Tax Credit (Making Work Pay)
The partial credit of 6.2% for payroll taxes that low income earners pay is eliminated. This will increase the tax liability of low-income single payers by $400, and joint filers by $800. The payroll tax cut mentioned above will take the place of this credit.

Earned Income Tax Credit (EITC) The economic stimulus act provided for a 45% increase of the EITC credit for families with three or more children, and higher income limits for qualifying for the credit. This provision is extended for 2011 and 2012. It is set to expire in 2013.

College Tuition Tax Credit
The economic stimulus act (“American Recovery and Reinvestment Act of 2009”) tax credit is renewed and now expires in 2013.

Energy Savings CreditThe 2011 credit of 30% (up to $1,500) for energy efficiency improvements to principal residences expires. In its place is a 10% credit (up to $500). There are additional limitations specific items such as furnaces, water heaters, and windows.


Other Changes:

College Savings Plans With the expiration of the Bush tax cuts, in 2011, 529 Plans can no longer be used to pay for a computer or broadband access.

Stable Investment Taxes
The capital gains tax rate will remain 0% for earners in the 15% income tax bracket or lower. Capital gains taxs on other earners remains 15%. Income from dividends is taxed at capital gains rates.


This is just an overview of the latest changes. Please check back for 2011 Tax Law Changes Part 2. If you have any questions, please feel free to call me at (209) 329-1255.