On December 17, 2010, President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act, a bill that extends the Bush-era tax cuts for another two years. While the heart of the bill provides relief by maintaining current marginal income tax rates, extending jobless benefits for 13 months, and reducing the Social Security payroll tax by 32% to 4.2%, additional provisions in the form of subsidies and tax credits flew in under the radar. Here are five of the add-ons that snuck into the 2010 Tax Relief bill. (For related reading, also take a look at 8 Tax Cuts Set To Expire In 2011.)

IN PICTURES: Top 10 Solutions For A Big Tax Bill

  1. Ethanol Subsidies
    Ethanol producers will continue to receive 45 cents for every gallon of ethanol blended into the gasoline supply. This subsidy, which the bill states will last throughout 2011, is expected to cost approximately $6 billion. Opponents of the extension criticize that the subsidy pays oil companies to use 12 billion gallons of corn ethanol that they are already required to use per the Federal renewable Fuels Standard. The bill also includes provisions to protect against ethanol imports via a continuing tariff. Most ethanol in the United States is made from corn, and the increased demand for corn has a ripple effect, raising the cost of corn not only for consumers, but for farmers who use it for feed. This, in turn, makes meat more costly to consumers. In response, Congress has set limits on the amount of ethanol that can be produced from corn.

  2. Commuter Tax Breaks
    The tax break for commuters was extended, allowing train and bus riders to use up to $230 per month in pre-tax dollars to purchase fares. For a commuter in the 35% tax bracket, this adds up to approximately $460 in savings each year. The deduction is available only to those commuters whose employers partake in a benefit program; the employee is not taxed on the money the employer sets aside for commuting expenses. The extension is especially valuable to workers in commuter-rich cities such as New York City, San Francisco, Chicago, Seattle and Boston. Environmental groups such as the Sierra Club support the tax breaks since they promote public transportation, which reduces road congestion, thereby improving air quality.

  3. Wind and Solar Grants
    The U.S. Department of the Treasury's 1603 cash grant program for the solar and wind industries was extended through 2011. The program was established under section 1603 of the American Recovery and Reinvestment Act of 2009 (ARRA), and provides cash grants in lieu of tax credits for certain, qualified energy properties. Cash grants are awarded, covering 10% or 30% of the total cost basis of the qualified property. According to the Solar Energy Industries Association, the grant program has supported more than 1,100 solar projects in 42 states, creating enough new solar capacity to power 200,000 homes. (For related reading, see Green Energy: Why We're Still Not Using It.)

IN PICTURES: Top 10 Green Industries

  1. Gulf Opportunity Zone
    Federal and state tax incentives for regions affected by hurricanes Katrina and Rita have been extended for one year. The Gulf Opportunity Zone Act of 2005 (GO Zone) provides a 50% bonus depreciation for qualified properties in the Louisiana GO Zone, and special tax-exempt bonds for the financing of construction and rehabilitation of residential, non-residential and public utility properties in the GO Zone.

  2. Energy-Efficient Homes
    The New Energy Efficient Home Tax Credit was extended through 2011. This tax credit is the sole federal incentive that exists to encourage efficiency in new home construction. The program offers $2,000 in tax credits to developers and builders who build homes that are constructed with a 50% or greater improvement in energy efficiency over the 2004 International Energy Conservation Code. The extension applies to new homes that are built during 2010 and 2011. (See Home Improvements: Does It Pay To Go Green? for more on the topic.)

The Bottom Line
Large bills are generally pushed through with the help of add-ons intended to appeal to certain groups. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act was no exception, as a number of tax credits and subsidies slid in under the radar as part of the bill. These five add-ons, despite their inherent controversies, are intended to provide additional tax incentives for individuals and businesses, as well as encourage the development and growth of environmental practices.

For the latest financial news, check out Water Cooler Finance: You're Never Too Old To Work.

Related Articles
  1. Professionals

    Advisors: Warn Clients About These Audit Triggers

    There are several factors that may increase the risk of an audit, especially with high-net-worth clients.
  2. Entrepreneurship

    What's the Purpose of IRS Form 1065?

    Business partners need the information on this form to complete their own tax returns. Here are the details.
  3. Markets

    Fat Tail Risk Makes Global Warming Scarier

    The cost of global warming does not take into account climate change-related catastrophes. Here's where fat-tail distributions come in.
  4. Economics

    The Biggest Items Obama Is Still Missing From His Mandate

    Learn how the biggest items missing from Obama's mandate include various forms of tax reform and closing the Guantanamo Bay prison in Cuba.
  5. Professionals

    How Going Green Can Cut Your Taxes

    Investors looking to improve their bottom line via green investing without risk should take advantage of these tax credits.
  6. Economics

    The Economics Of Solar Power

    Even with the massive strides made in technological innovation, sustainable energy has failed to usurp traditional fossil fuels.
  7. Investing

    Impact Investing: How it Works and How to Invest

    Impact investing makes a positive impact, socially and/or environmentally, while also aiming to produce positive returns, and it's a growing trend.
  8. Stock Analysis

    Watch These Top Wind Power Stocks, ETFs

    Wind power has already grown impressively and its best days are ahead. Here are some stocks and ETFs to consider.
  9. Economics

    Pros And Cons Of Solar Energy

    While solar energy technology has some disadvantages that make it somewhat expensive in certain markets, it is becoming an increasingly cost-competitive alternative to fossil fuels.
  10. Taxes

    What is Adjusted Gross Income?

    Adjusted gross income (AGI) is a term from the Internal Revenue Code. AGI is used to determine a person’s income taxes due.
  1. Working Tax Credit (WTC)

    A tax credit offered to low-income individuals working in the ...
  2. Green collar

    A worker who is employed in an industry in the environmental ...
  3. New Alternative Transportation ...

    A bipartisan proposal introduced in April, 2011 that amends the ...
  4. Water Quality Insurance Syndicate ...

    An American company that provides water pollution liability insurance ...
  5. Water Quality Improvement Act Of ...

    Legislation that expanded the federal government's authority ...
  6. Water Pollution Liability

    Financial and legal responsibility for causing contamination ...
  1. What are the best free online calculators for calculating my taxable income?

    Free online calculators for determining your taxable income are located at Bankrate.com, TaxACT.com and Moneychimp.com. Determining ... Read Full Answer >>
  2. Can I get a tax credit from conducting research and development?

    It is possible for a company to qualify for a research and development tax credit for conducting research and development. ... Read Full Answer >>
  3. What is the difference between MAGI (modified adjusted gross income) and adjusted ...

    Calculating personal income tax correctly involves understanding two important tax terms: adjusted gross income (AGI) and ... Read Full Answer >>
  4. What is the difference between a regressive tax versus a progressive tax?

    A progressive tax is one that increases along with an individual's ability to pay the tax, while a regressive tax doesn't ... Read Full Answer >>
  5. What are some ways to minimize tax liability?

    Minimizing tax liability is one of the most important financial planning aspects for business owners and individuals each ... Read Full Answer >>
  6. Is the high cost of installing solar panels justified by the money saved by going ...

    In favorable locations and under suitable conditions, homeowners can recuperate the cost of installing solar panels. The ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!