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House passes tax extenders

More than a week after House Ways and Means and Senate Finance committee chairs reached an agreement on a legislation to extend expired tax breaks, the deal is halfway done.

Following some tweaks this week, the full House voted 215 to 204 this afternoon to send the The American Jobs and Closing Tax Loopholes Act (H.R. 4213) to the Senate.

There was just one problem. The Senate had already shut down for its Memorial Day vacation district work session.

The Senate promises to jump right on the bill when it gets back to Washington, D.C., on June 7. Who's holding their breath with me?

Individual tax measures the same: There were no major changes to the key tax breaks that affect many individual taxpayers. They are:

  • Deduction of state and local general sales taxes.
  • Additional standard deduction for real property taxes.
  • Above-the-line deduction for qualified tuition and fees.
  • Above-the-line deduction for certain expenses of elementary and secondary school teachers.
  • Extension of tax-free distributions from individual retirement plans for charitable purposes.

Each of these provisions will apply to the 2010 tax year. Yep, even though we're almost half through 2010, lawmakers decided not to extend them beyond one year.

This primarily is for budgetary reasons, but I swear it looks sometimes like Congress enjoys this painful process!

What did change: To come up with enough votes for passage, some changes were made to the tax and jobs bill.

House leaders delayed by a year -- until Jan. 1, 2011, rater than retroactively to the beginning of this year -- the proposed tax increase on hedge fund managers. Known as carried interest, this provision will phase in taxation of this money at ordinary income tax rates rather than at capital gains rates.

The change, said lawmakers, will give investment fund managers time to adjust to the new tax.

I still don't think they and other folks who will pay more taxes so some breaks can be continued are going to be happy. Tax Update Blog elaborates.

Other changes included abridged extensions to expiring jobless benefits, including subsidies to help unemployed residents obtain coverage through COBRA, and a delay until 2012 of a cut to physicians' Medicare payments.

It's still unclear, however, if that will be enough to get the bill through the Senate and to the president's desk for enactment.

As I said earlier this  week, the wait continues.

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