The last few tax years have been filled with uncertainty with late changing tax laws impacting the majority of taxpayers. Thankfully, the passage of the Tax Relief/Job Creation Act in December, 2010 eliminated much of this uncertainty for 2011. In addition to the programmed changes already built into the tax code, outlined here are some of the major tax provisions that could impact you and your family.

Tax Rates. Income tax, ordinary dividend tax, and capital gains tax rates were all scheduled to move up in 2011. These rates are now to remain unchanged through 2011.

Deduction and Exemption Phase-out. Itemized deductions and personal exemptions will not be subject to the phase-out rules in place in 2009 and prior years. So for 2011, your deductions and exemptions will not be reduced due to your income level.

Direct charitable contributions from retirement plans. The ability for qualified seniors to contribute directly from a retirement account to an eligible charitable organization is also extended through 2011.

Earned Income Credit. Changes in the Earned Income Credit expanded the amount of the Credit and the income qualifications to receive the Credit. These expanded provisions to qualify for the increased credit are extended through 2012.

American Opportunity Tax Credit (AOTC). The AOTC (formerly named Hope Education Credit) is also extended through 2012. This provision allows for up to $2,500 in qualified secondary educational expense (tuition, fees, and materials) to be deducted for qualified students.

Alternative Minimum Tax (AMT) "Patch". For the first time in three years Congress has increased the AMT exemption amount prior to the start of the year. Because of this, the Alternative Minimum Tax (AMT) will not impact up to 21 million additional taxpayers until after 2011.

Estate Taxes. In 2011, the maximum estate tax is 35%. Up to $5 million in assets are sheltered from this tax. In addition, the old "stepped-up" basis rules are re-established allowing beneficiaries to increase the value of inherited assets to the fair market value as of the date of death. These rules stay in place through 2012.

Gift Taxes. The gift tax rates are now reunified with estate taxes. This means the gift tax exclusion amount for 2011 is $5 million with a top gift tax rate of 35%. The annual gift exclusion amount remains $13,000 ($26,000 per couple).

Other Extended Benefits. A number of other expiring tax benefits extend through 2011. Among them are:

• $250 "above-the-line" deduction for unreimbursed classroom expenses for qualified elementary and secondary school teachers
• General sales tax itemized deduction in lieu of taking a state income tax deduction
• Tuition and Educational expense deduction
• $1,000 Child Tax Credit that does not fall back to $500 as scheduled
• Coverdell Savings Accounts may still be used to cover elementary and secondary school expenses. The annual contribution amount also remains at $2,000 and does NOT roll back to the old $500 level

According to recently published research by the CollegeBoard, the average cost to attend college has gone up 8.3% for the 2011/2012 school year. This cost is vastly over the projected inflation rates.

What is occurring?

This dramatic increase is being driven by a number of factors:

California, Arizona, and Washington state colleges and universities are raising their in-state tuition dramatically. California's tuition and fees increase at its public universities is 21%. Arizona and Washington have raised their tuition and fees by 16-17%.

	State support is being reduced. With all the state budgets being under pressure from the poor economy, this is impacting the amount of support states are giving to their own colleges and universities.
	Federal funding is also under pressure. With increasing federal deficit spending, many are concerned with the long-term availability of federal support for funding college education.
	The increases in fuel prices and other costs are impacting our educational institutions just as much as in other areas of our economy.

What can you do?

	Plan. If college is in your children's future, save now. Take a look at state 529 plans or Coverdell savings plans to help save for college expenses using tax-advantage plans.
	It's still worth it. According to the CollegeBoard research, median family income for those with at least a bachelor's degree or more was $51,000 more than families with only a high school diploma.
	Stay in-state. In-state tuition is a much better deal than paying as an "out-of-state" student. The average out-of-state surcharge is over $12,000 per year!
	Get help. In addition to tax breaks, most schools provide financial aid, scholarships, and guaranteed loans. The amount of financial aid awarded in 2009/10 was more than $154 billion or approximately $11,500 per undergraduate student. And roughly 56% of students with a four-year bachelor's degree graduate with some level of debt (currently averaging approximately $22,000).
	Private colleges more affordable? If there is a silver lining, it is that cost increases for private four-year colleges only range from 3.2 - 4.4% in 2011/12. So the cost gap with public four-year institutions is narrowing. The bad news? The average total annual charge for private nonprofit schools is $38,589 for 2011/12.

Finally, after two years of no changes, the Social Security Administration announced that monthly social security and supplemental security income benefits (SSI) will increase in 2012 by 3.6%. In addition, other changes that take place based on the national average wage index will also be changed.A recap of the key amounts is outlined here: