Tax Relief Act of 2010: Tax Rates

The Act extends existing federal income tax rates for two additional years. As in 2010, the federal tax bracket rates for 2011 and 2012 will be 10%, 15%, 25%, 28%, 33%, and 35%. (Without this legislation, federal income tax rates would have increased beginning in 2011 — the current 10% federal income tax bracket would have disappeared, and the five remaining tax brackets would have been 15%, 28%, 31%, 36%, and 39.6%.)

Existing tax rates for long-term capital gains and qualifying dividends are also extended through 2012. As a result, long-term capital gains and qualifying dividends will continue to be taxed at a maximum rate of 15%. If you're in the 10% or 15% marginal income tax brackets, a special 0% rate will generally continue to apply.

The alternative minimum tax (AMT) is essentially a parallel federal income tax system, with its own rates and rules. To prevent a dramatic increase in the number of individuals subject to AMT, the Act retroactively increases AMT exemption amounts for 2010, and extends the increased exemption amounts to 2011. Nonrefundable personal income tax credits will also continue to be allowed to offset AMT liability in 2010 and 2011.

Before Act After Act
Federal income
tax brackets
Five 2011 tax brackets: 15%, 28%, 31%, 36%, 39.6% Six 2010 tax brackets extended to 2011 and 2012: 10%, 15%, 25%, 28%, 33%, 35%
Maximum tax rate on long-term capital gains Starting in 2011: 20% (10% for individuals in the 15% tax bracket) 2010 rates extended to 2011 and 2012: 15% (0% for individuals in the 10% or 15% tax brackets)
Tax on qualifying dividends Taxed as ordinary income
starting in 2011
2010 treatment extended to 2011 and 2012: 15% (0% for individuals in the 10% or 15% tax brackets)
Alternative minimum tax (AMT) Personal tax credits not allowed against AMT beginning in 2010

Exemption amounts 2010:
  • $45,000 (married joint)
  • $33,750 (single)
  • $22,500 (married separate)
Personal tax credits allowed against AMT in 2010 and 2011

Exemption amounts 2010:
  • $72,450 (married joint)
  • $47,450 (single)
  • $36,225 (married separate)
Exemption amounts 2011:
  • $74,450 (married joint)
  • $48,450 (single)
  • $37,225 (married separate)

Slightly lower rates would apply to qualifying property held for five or more years.

See also:
Summary | Tax Rates | Estate Tax | Gift and Transfer Tax | Business and SE | Tax Credits | Deductions | Other

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