The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which became law on Dec. 17, includes many taxpayer-friendly provisions, and almost everyone will benefit. Here's the story, along with some last-minute yearend tax planning tips to help you cash in.

Existing Tax Rates Extended Through 2012

The new law extends the current 10%, 15%, 25%, 28%, 33%, and 35% tax-rate brackets through 2012. The current 0% and 15% rates on most long-term capital gains and dividends are also extended through 2012.

Year-End Planning Tip: The standard year-end tax-deferral strategy is back in play. You can postpone income and capital gains into 2011 without fear of paying a higher tax rate next year (assuming your taxable income remains about the same or lower).

Social Security Tax Reduction for 2011 Only

The new law cuts the 6.2% Social Security tax withholding rate on employee salaries from 6.2% to 4.2%. This temporary change affects the first $106,800 of 2011 wages. So the maximum savings are $2,136 for unmarried individuals and $4,272 for couples. You should notice bigger paychecks in a few weeks after your company updates its payroll tax withholding procedures. The Social Security tax component of the self-employment tax is cut from 12.4% to 10.4% for 2011, so self-employed folks will benefit too.

Personal Exemption and Itemized Deduction Phase-Outs Repealed Through 2012

For 2010, unfavorable phase-out rules that could reduce some of your most-cherished write-offs were temporarily repealed. The phase-out rules were scheduled to come back next year. Thankfully, the new law keeps the repeal in place through 2012.

Year-End Planning Tip: The standard year-end tax planning strategy of accelerating itemized deduction expenditures into 2010 to lower this year's tax bill is still viable. Next year, you can do the same drill to lower your 2011 tax bill. Ditto for 2012. Good candidates for this strategy are state and local income and property taxes that you would otherwise pay early next year, charitable donations and medical expenses.

Alternative Minimum Tax Patch for 2010 and 2011

It's become an annual ritual for Congress to "patch" the AMT rules to prevent millions more households from getting socked with this add-on tax. The patch consists of allowing bigger AMT exemptions and allowing various personal tax credits to offset the AMT. The new law makes the patch for 2010 and for 2011, as well.

Year-End Planning Tip: Accelerating payments for state and local income and property taxes into 2010 will do little or no good if you'll be hit with the AMT this year. Under the AMT rules, you get no deductions for state and local taxes. Accelerating medical expenses into this year may not do any good either because a stricter deduction limitation rule applies for AMT purposes.

Charitable Donations from IRAs Extended Through 2011

For 2006-2009, IRA owners who had reached age 70 were allowed to make annual charitable donations of up to $100,000 directly out of their IRAs. These donations did not directly affect the IRA owner's income tax bill because no deductions were allowed. However, the donations counted as IRA-required minimum distributions (RMDs). So, charitably inclined seniors with more IRA money than they needed could reduce their taxes by arranging for tax-free IRA donations to take the place of taxable RMDs. This break for well-off seniors expired at the end of 2009. The new law retroactively restores it for 2010 and extends it through 2011.

Year-End Planning Tip: You still have plenty of time to take advantage of the IRA donation opportunity for the 2010 tax year. That's because you can treat donations made in January 2011 as 2010 donations and as 2010 RMDs (up to the $100,000 limit for 2010). Any other donations made in 2011 will be treated as 2011 donations and 2011 RMDs (up to the $100,000 limit for 2011).

$1,000 Child Tax Credit Extended Through 2012

For 2011, the maximum credit was scheduled to drop from $1,000 to only $500. The new law extends the $1,000 credit through 2012.

Generous College Tuition Tax Credit Extended Through 2012

For 2011, the American Opportunity credit, which can be worth up to $2,500 and can be claimed for up to four years of an undergraduate education, was scheduled to be replaced by the less-generous Hope Scholarship credit. The new law extends the American Opportunity credit through 2012.

College Tuition Deduction Extended Through 2011

This write-off, which can be as much as $4,000, expired at the end of 2009. The new law retroactively restores the deduction for 2010 and extends it through 2011.

Favorable Coverdell Education Savings Account Rules Extended Through 2012

For 2011, the maximum contribution to federal-income-tax-free Coverdell college savings accounts was scheduled to drop from $2,000 to only $500, and a stricter phase-out rule would have limited contributions by many married joint-filing couples. The new law extends the current more-favorable contribution rules through 2012.

Employer Educational Assistance Plans Extended Through 2012

Currently, an employer can provide up to $5,250 in annual federal-income-tax-free educational assistance payments to an eligible employee. College and graduate school costs can be covered, and the education need not be job-related. This taxpayer-friendly deal was scheduled to expire at the end of this year. The new law extends it through 2012.

Favorable Student Loan Interest Deduction Rules Extended Through 2012

This write-off, which can be as much as $2,500 (whether you itemize or not) was scheduled to fall under less-favorable rules in 2011. There would have been a 60-month limit on deductible interest, and a stricter phase-out provision would have reduced or eliminated the write-off for many middle-income taxpayers. The new law extends the current more-favorable rules through 2012.

Option to Deduct State and Local Sales Taxes Extended Through 2011

For 2004-2009, individuals who paid little or no state income taxes were given the option of claiming an alternative itemized deduction for state and local sales taxes. The option expired at the end of 2009. The new law retroactively restores the option for 2010 and extends it through 2011.

Favorable Earned Income Tax Credit Rules Extended Through 2012

Increased earned income credits for families with three or more qualifying children and beneficial rules for married joint-filing couples were scheduled to expire at the end of this year. The new law extends the current, more-favorable rules through 2012.

Favorable Child Care Tax Credit Rules Extended Through 2012

Most parents can now claim a credit of up to $600 for costs to care for one child under 13, or up to $1,200 for costs to care for two or more kids under 13, so the parents can go to work. Lower-income parents can claim larger credits of up to $1,050 and $2,100, respectively. Next year, the maximum credits were scheduled to drop to $480 and $960 for most parents and $720 and $1,440 for lower-income parents. The new law extends the current more-generous credits through 2012.

Smaller Tax Credit for 2011 Energy-Efficient Home Improvements

For 2009 and 2010, 30% of expenditures for energy-efficient insulation, windows, doors, roofs, and heating and cooling equipment in U.S. residences could qualify for a credit up to a maximum credit of $1,500. The new law extends the credit through 2011, but the percentage has been scaled back to only 10%, and the maximum credit is only $500. The $500 limit is reduced by any credits claimed in earlier years, so if you've already dipped into this trough, you're probably done.

$250 Deduction for K-12 Educators Extended Through 2011

For the last few years, teachers and other personnel at K-12 schools could deduct up to $250 of school-related expenses they paid out of their own pockets whether they itemized or not. This break expired at the end of 2009. The new law retroactively restores it for 2010 and extends it through 2011.

Surprise: Real Estate Tax Deduction for Non-Itemizers Is Not Resurrected

For 2008 and 2009, unmarried individuals who did not itemize could write off up to $500 of state and local real property taxes by claiming an increased standard deduction. Married joint-filing couples could write off up to $1,000. This break expired at the end of 2009. Surprisingly, the new law did not restore it.

New Estate and Gift Tax Rules for 2011 and 2012

In last week's column, I explained the favorable new estate and gift tax rules for 2011 and 2012. When I wrote about them, they were not yet a done deal. Now they are.