This past week it was announced that the tax cuts will not be as far reaching as initially hoped for under the new administration. Pres-Elect Obama still maintains that he will give tax cuts to the poor, which are likely to actually be a payable tax credit since the poor targeted by his plan actually pay no taxes. To pay for this, he is increasing the taxes on the rich. The definition of rich, though keeps shifting. Here’s the list of tax provisions on the chopping block right now.
The quickest way to change the tax system is to allow certain tax provisions to expire. These are the ones being talked about that we’re going to lose:
Capital Gains: Rates will rise to 10 or 20 percent, depending upon income, on January 1, 2009.
Dividends: Rates will rise to match standard income tax rates on January 1, 2009.
Child Credit: This credit will shrink from $700 to $500 per child on January 1, 2011.
The Income Tax: Rates will increase between 3 and 4.5 percentage points in each bracket on January 1, 2011.
The 10 Percent Bracket: The bracket will be eliminated on January 1, 2011, raising the income tax burden of many workers by 5 percentage points.
The 15 Percent Bracket for Joint Filers: On January 1, 2011, the upper limit of this bracket will shrink from 200 to 167 percent of the upper limit of the 15 percent bracket for single filers, creating a marriage penalty.
Standard Deduction for Joint Filers: On January 1, 2011, this will shrink from 200 to 167 percent of the standard deduction for single filers, creating a marriage penalty.
The Estate Tax: The top rate for this tax will increase to 60 percent on January 1, 2011, and the value of an estate exempt from taxation will shrink to $1 million, which is less than it is today.
Please keep tuned here and make sure you’re signed up for our weekly enewsletter. We’ll be pointing out the strategies you can use right now to prepare for an uncertain tax future.