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July 2011 Tax Alerts
Tax Cuts Extended for Two More Years
As of December 17, 2010, both the House of Representative and the Senate approved the tax cut agreement proposed by President Obama and the GOP. The agreement will extend the current individual, capital gains, and dividend tax rates for the next two years.

Below are the major provisions:
• Social Security payroll tax will be reduced (6.2% to 4.2%)
• An extension of unemployment benefits through 2011
• Individual tax rates for all levels will not change
• Taxes on Capital Gains and dividends (15%) will be extended for two years
• The Marriage Penalty will be extended for 2 more years
• The Alternative Minimum Tax "patch" will be extended for 2 years
• For the next two years, the Estate Tax provides for a minimum rate of 35% with a
  $5 million exclusion
• Capital investments during 2011 will be subject to 100% bonus depreciation

Sales Tax Decreases by 1% Effective July 1, 2011
The one-percent sales and use tax rate increase that was effective April 1, 2009 will expire June 30, 2011. This lowers the statewide base tax rate from 8.25 percent to 7.25 percent effective July 1, 2011. Voter approved district taxes remain in effect and are added to the base rate for applicable sales and purchases.

District taxes are applicable to four cities in San Diego County. The total sales and use tax rate for purchases and sales for these cities are El Cajon 8.75%, La Mesa 8.5%, National City 8.75% and Vista 8.25%.

IRS Increases Standard Mileage Rates
Acknowledging higher gas prices, the IRS has increased the standard mileage rate starting July 1, 2011, by 4.5 cents per mile. The rate for the second half of 2011 is 55.5 center per mile. The rate for medical and moving driving is 23.5 cents per mile for miles driven after June 30, 2011. Taxpayers will need to track deductible miles driven for the first and second half of the year separately to compute the correct 2011 tax deduction.

The rate for charitable driving remains unchanged at 14 cents per mile.