Tax Briefs

2011 Standard Mileage Rates:
Due to higher gasoline prices, the Intemal Revenue Service is increasing the tax deduction motorists can take for using private vehicles for business in a rare midyear move. Thus, for January 1, 2011 — June 30, 2011 the rate is 51 cents per mile and effective July l it increases 4 1/2 cents to 55 1/2 cents per mile for business purposes. The rate increase also affects the medical and moving mileage rate of 19 cents, increasing to 23 1/2 cents per mile on July 1 as well. The standard mileage rate for services to charitable organizations remains unchanged at 14 cents per mile.

2011 Inflation-adjusted Amounts:
Various inflation-adjusted tax numbers for 2011 will change slightly or not at all . For 2011, the (1) value of each personal and dependent exemption will stay at $3,700; (2) standard deduction, which is claimed by most taxpayers, will increase to $11,600 for married couples filing a joint return and $5,800 for singles and married individuals filing separately; (3) standard deduction for heads of household will increase to $8,500, and (4) annual gift tax exclusion will stay at $13,000.

The major pension plan amounts will stay the same for 2011 . This means that the following amounts will remain unchanged from their 2010 amount: (1) benefit limit for defined benefit plans ($195,000); (2) defined contribution plan limit ($49,000); (3) compensation limit for determining benefits and contributions ($245,000); (4) definition of a highly compensated employee ($110,000); (5) elective deferral limit ($16,500); (6) SEP contribution threshold ($5,500); and (7) SIMPLE retirement account limit ($11,500).

For 2011 the first $106,800 of employee wages will be subject to FICA tax at a rate of 13.3% (combined employer and employee shares). This is decreased from the 2010 rate of 15.3%. In December 2010, Congress approved a temporary 2 percentage point reduction in the Social Security payroll tax rate for employees and the self-employed in 2011 as part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. The Social Security payroll tax rate in 2011 is 4.2% for employees and 10.4% for the self-employed. The law makes no changes to the Social Security payroll tax rate for employers (6.2%). Wages above the threshold will be subject to the Medicare tax of 2.9% (combined employer and employee shares). The self-employment (SE) tax applies at the same rates on the same amounts of SE income and there will be no upper limit on the income subject to the 2.9% tax rate.