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Started By
Message
why TAXES may surge next yr........as per yahoo....
Posted on 11/10/11 at 7:42 am
Posted on 11/10/11 at 7:42 am
In a recent tax planning meeting with one of our clients, we shocked them with what their income tax future looked like for 2013 if Congress continues to do nothing to provide a long-term permanent set of tax laws (and it looks as if lawmakers are headed down this track).
They had no idea what tax breaks were expiring this year and next year, and how much it would cost them personally in extra income tax. But they aren't alone, many Americans and even tax professionals aren't aware that their tax bill could rise dramatically next year.
More from FoxBusiness.com:
• Telling the Kids About Financial Woes: How Much too Much?
• How Thieves Use Facebook to Steal Your Identity
• How to Know if Your Prescription Drugs are Counterfeit
These clients are your average American family and their situation is a good example of the law changes that will affect all of us. Here's their tax situation with a table summarizing the expiring tax laws that are scheduled to occur in 2011 and 2012.
Meet the Smiths: 26-year-olds Bill and Joan have been married for five years and have two young children. Bill earns about $65,000 a year in sales and Joan has gone back to work and earns about $35,000 annually. Bill owes quite a bit on his college student loans and will pay about $3,000 in interest on them in 2013. With Joan working again, they are paying $3,000 for year-round child care. Joan inherited some AT&T stock from her grandmother, which pays her $1,000 in dividends every year. Finally, counting home mortgage interest, they have about $20,000 in itemized deductions.
The first big change affecting the Smiths will be a combined increase in income tax rates, and a tightening of tax brackets as a result of the expiration of the Bush tax cuts. We estimate this will cost them $960 in 2013.
Bill will lose the complete deduction of his student loan interest in 2013, costing about $840. The pair's allowable deduction for child care will drop to $2,400 from $3,000, and they will also see their credit for children drop in half, costing another $1,000.
The marriage tax penalty will come roaring back to hit the Smiths in 2013, costing an estimated $500. The tax on their dividend income will go increase to $280 from $150, adding another $130. Finally, although we did not calculate the effect, without Congressional action to once again "fix" the alternative minimum tax, the Smiths could owe this ugly tax as well!
Luckily for the Smiths — but not for many Americans — other major changes for 2013, which do not personally affect them, include a phase out of itemized deductions and personal exemptions if their income starts to climb.
In summary, because of tax laws expiring this year and next, we estimate that the Smiths will owe $3,598 more in income tax in 2013 than in 2011 with no change in their income.
Major Individual Income Tax Benefits Expiring 12/31/2011:
• Personal tax credits applied against income tax no longer apply
• Higher alternative minimum tax exemptions revert back to extraordinarily-low thresholds
• $250 school teacher expense deduction ends
• Mortgage insurance premium deduction expires
• State and local sales tax deductions expire
• Tuition and related fees deduction end
• IRA to charity tax-free transfers stop
• 2% Social Security tax reduction ends
Major Individual Income Tax Benefits Expiring 12/31/2012:
• Marriage penalty equalization ends
• Dividends taxed at capital gains rates removed, taxed at regular rates now
• Capital gains low tax rates expires
• Removal of itemized deduction phase out for higher income Americans
• Removal of personal exemption phase out for higher income Americans
• Child care deduction limit of $3,000 reverts to $2,400
• Child credit reduces from $1,000 per child to $500 per child
• Low 10% tax bracket for low income Americans is eliminated
• Lower income tax rates and smaller brackets expires
• Refundable adoption credit and reduced deduction
• American Opportunity college education credit expires
• Major reduction in earned income credits and refunds
• Income tax exemption for debt forgiven on home foreclosures and repossessions
• Deduction for student loan interest ends
• Education IRA limit drops from $2,000 to $500
this sucks a bag of donkey dicks......
They had no idea what tax breaks were expiring this year and next year, and how much it would cost them personally in extra income tax. But they aren't alone, many Americans and even tax professionals aren't aware that their tax bill could rise dramatically next year.
More from FoxBusiness.com:
• Telling the Kids About Financial Woes: How Much too Much?
• How Thieves Use Facebook to Steal Your Identity
• How to Know if Your Prescription Drugs are Counterfeit
These clients are your average American family and their situation is a good example of the law changes that will affect all of us. Here's their tax situation with a table summarizing the expiring tax laws that are scheduled to occur in 2011 and 2012.
Meet the Smiths: 26-year-olds Bill and Joan have been married for five years and have two young children. Bill earns about $65,000 a year in sales and Joan has gone back to work and earns about $35,000 annually. Bill owes quite a bit on his college student loans and will pay about $3,000 in interest on them in 2013. With Joan working again, they are paying $3,000 for year-round child care. Joan inherited some AT&T stock from her grandmother, which pays her $1,000 in dividends every year. Finally, counting home mortgage interest, they have about $20,000 in itemized deductions.
The first big change affecting the Smiths will be a combined increase in income tax rates, and a tightening of tax brackets as a result of the expiration of the Bush tax cuts. We estimate this will cost them $960 in 2013.
Bill will lose the complete deduction of his student loan interest in 2013, costing about $840. The pair's allowable deduction for child care will drop to $2,400 from $3,000, and they will also see their credit for children drop in half, costing another $1,000.
The marriage tax penalty will come roaring back to hit the Smiths in 2013, costing an estimated $500. The tax on their dividend income will go increase to $280 from $150, adding another $130. Finally, although we did not calculate the effect, without Congressional action to once again "fix" the alternative minimum tax, the Smiths could owe this ugly tax as well!
Luckily for the Smiths — but not for many Americans — other major changes for 2013, which do not personally affect them, include a phase out of itemized deductions and personal exemptions if their income starts to climb.
In summary, because of tax laws expiring this year and next, we estimate that the Smiths will owe $3,598 more in income tax in 2013 than in 2011 with no change in their income.
Major Individual Income Tax Benefits Expiring 12/31/2011:
• Personal tax credits applied against income tax no longer apply
• Higher alternative minimum tax exemptions revert back to extraordinarily-low thresholds
• $250 school teacher expense deduction ends
• Mortgage insurance premium deduction expires
• State and local sales tax deductions expire
• Tuition and related fees deduction end
• IRA to charity tax-free transfers stop
• 2% Social Security tax reduction ends
Major Individual Income Tax Benefits Expiring 12/31/2012:
• Marriage penalty equalization ends
• Dividends taxed at capital gains rates removed, taxed at regular rates now
• Capital gains low tax rates expires
• Removal of itemized deduction phase out for higher income Americans
• Removal of personal exemption phase out for higher income Americans
• Child care deduction limit of $3,000 reverts to $2,400
• Child credit reduces from $1,000 per child to $500 per child
• Low 10% tax bracket for low income Americans is eliminated
• Lower income tax rates and smaller brackets expires
• Refundable adoption credit and reduced deduction
• American Opportunity college education credit expires
• Major reduction in earned income credits and refunds
• Income tax exemption for debt forgiven on home foreclosures and repossessions
• Deduction for student loan interest ends
• Education IRA limit drops from $2,000 to $500
this sucks a bag of donkey dicks......
Posted on 11/10/11 at 8:30 am to BlackRaven
Article is misleading in a big way. I don't have time to go through it line by line, but the biggest thing on the table is the bush tax CUTS that may expire, primarily lower rates on investment type income.
I doubt the effective tax rate for the middle class increases at all and may even drop as I expect the SS rate cut to be renewed and possibily increased.
I doubt the effective tax rate for the middle class increases at all and may even drop as I expect the SS rate cut to be renewed and possibily increased.
Posted on 11/10/11 at 8:52 am to BlackRaven
Yeah but they will save on not having to hire a CPA to prepare their return and make sure they got all of these "special interest" tax benefits that are constantly being enacted.
Posted on 11/10/11 at 9:16 am to BrandNew
Flat tax ain't happening. Ever.
Posted on 11/10/11 at 9:43 am to Tiger n Miami AU83
quote:
Flat tax ain't happening. Ever.
This...unfortunately.
Politicians gonna politic.
Posted on 11/10/11 at 12:08 pm to Tiger n Miami AU83
quote:
Article is misleading in a big way.
Why is it misleading? These are provisions in the tax code set to expire. It will take Congressional action, and Presidential approval, to extend any of these provisions. While it is likely that some of hte provisions will be extended, can you honestly predict which ones will?
Posted on 11/10/11 at 2:31 pm to Poodlebrain
Misleading is not entirely accurate. Retarded is a better description of the article.
Posted on 11/10/11 at 3:04 pm to Tiger n Miami AU83
quote:
Misleading is not entirely accurate. Retarded is a better description of the article.
I don't believe the article is misleading. The article is obviously slanted towards not wanting many of these provisions to expire and for them to be renewed, but misleading is not what I would call it.
This post was edited on 11/10/11 at 3:05 pm
Posted on 11/11/11 at 8:56 am to Tiger n Miami AU83
quote:
Misleading is not entirely accurate. Retarded is a better description of the article.
All of these tax increases are 100% certain to occur, and significant, unless Congress agrees to extend them. How much attention has the press given this impending economic cost to taxpayers? Compare that to all the fuss that was made over the Year 2K threat that was just a potential economic cost. Don't you think known cost increases that are significant deserve as much attention as potential ones?
Posted on 11/13/11 at 2:35 pm to BlackRaven
This can't be true. Obama promised that taxes would only go up for those evil rich people making over $250,000 per year.
Posted on 11/13/11 at 4:22 pm to jennyjones
quote:
This can't be true. Obama promised that taxes would only go up for those evil rich people making over $250,000 per year.
Poli board brah...
Posted on 11/15/11 at 4:16 am to rickgrimes
YAHOO is about as liberal as you can get for reporting. They are simply attempting to pre-emp the non-renewal of the Bush tax cuts. plain and simple.
This post was edited on 11/15/11 at 4:18 am
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