WASHINGTON - It's the most significant new tax law in a decade, but what does it mean for you? Big savings for millions of taxpayers - more if you have young children or attend college, a lot more if you're wealthy.
The package, signed Friday by President Obama, will save taxpayers, on average, about $3,000 next year.
Many families will be able to save much more by taking advantage of tax breaks for being married, having children, paying for child care, going to college, or investing in securities.
There are even tax breaks for paying local sales taxes and using mass transit, and a new Social Security tax cut for nearly every worker who earns a wage.
Most of the tax cuts have been around since early in the decade. The new law will prevent them from expiring Jan. 1. Others are new, such as the decrease in the Social Security payroll tax. Altogether, they provide a thick menu of opportunities for families at every income level.
"The tax code wants to encourage people to invest in their homes, invest in their education, invest in their retirement, and you have to know about all of these in order to take advantage of it," said Kathy Pickering, executive director of the Tax Institute at H&R Block.
The law extends most of the tax cuts for two years, including lower rates for the rich, the middle class, and the working poor, a $1,000-per-child tax credit, tax breaks for college students, and lower taxes on capital gains and dividends.
A new one-year tax cut will reduce most workers' Social Security payroll taxes by nearly a third in 2011 - to 4.2 percent from 6.2 percent.
A mix of other tax cuts will be extended through next year.
They include deductions for student loans and local sales taxes and a tax break for using mass transit. The alternative minimum tax will be patched, sparing more than 20 million middle-income families from increases averaging $3,900 in 2010 and 2011.