Happy Holidays from Lynam & Associates and Washington, D.C.!

All of us at Lynam & Associates wish you a happy and safe holiday season. Last week, everyone who receives either a paycheck or an unemployment check got an early Christmas present in the tax bill signed into law on Saturday. Everyone will be affected by the new law, which extends current tax cuts through 2012, as it keeps the individual income tax rates at 10%, 25%, 28%, 33%, and 35%. Federal unemployment insurance benefits are extended by one year, and the payroll tax was cut by 2% (meaning that employees will pay only 4.2% tax for the next year), resulting in bigger take-home pay for all workers.

Non-profits will hopefully see more donations in the next two years with a provision to extend for tax-free distribution from Individual Retirement Accounts (IRAs) for charitable contributions of up to $100,000 per taxpayer. Donors of conservation easements can qualify for enhanced income tax deductions, continuing the incentive to donate conservation easements. Also, continually low interest rates make charitable estate planning devices such as a Grantor Retained Annuity Trust (GRAT) or a Charitable Lead Annuity Trust (CLAT) very attractive right now. Any charitable contributions you want to make for the 2010 tax year can be made through January 31, 2011.

Estate planning gets fixed for the next two years: the federal estate tax exemption will be increased to $5 million per person and $10 million per couple, with a lower top tax rate of 35% for estate, gift, and generation-skipping transfer taxes. Those who were waiting for more clarity before starting their estate planning now have a go-ahead.

Two other useful gift provisions have been extended for two years: the annual $2,000 deduction for contributions to Coverdell Education Savings Accounts and a deduction of up to $2,500 in interest on qualified education loans.

Please contact us should you have any questions about the new taxes, and have happy and safe holidays!