The 2010 Tax Relief Act that was passed by Congress and signed into law by the president has been getting a lot of coverage in the media lately. Almost everyone has heard about the increase in the estate tax exemption, gift tax exclusion, and generation skipping transfer tax exemption.

Estate Tax Exemption

In 2011 and 2012, the estate tax exemption will increase to $5 million with a top tax rate of 35 percent. The new law also imposed a retroactive estate tax for 2010. Originally, there was a trade off in 2010. The estate tax was replaced by a carryover basis provision. Now, there’s a choice between a retroactive estate tax in 2010 with an exemption of $5 million and a top rate of 35 percent or no estate tax with the carryover basis provision.

Gift Tax Exclusion

The gift tax exclusion is currently $1 million. In 2011 and 2012, it will increase to $5 million with a maximum tax rate of 35 percent. Such a high gift tax exclusion will create some unique planning opportunities at least over the next two years.

Generation Skipping Tax

It seems like $5 million is the magic number with the estate planning components of the new law. The generation skipping transfer tax exemption also goes up to $5 million in 2011 and 2012. There’s an added benefit applicable to the GST tax only in 2010. No GST tax in 2010.

The one thing that hasn’t been getting much attention in the media lately is the fact that the tax law changes are in effect for only TWO YEARS! You know how fast two years can go by.

Who knows what will happen after that?

Related posts:

1. Estate Tax in 2011
2. Estate Tax Exemption Changes
3. Gift Tax in 2010
4. New Tax Law Changes for 2011
5. 5 Year End Tax Planning Tips