- The first wave
GOP tax cuts for investors, small business owners, and families enacted in 2001 and 2003 will expire on January 1, 2011.
- The top prsonal income tax rate will rise from 35 to 39.6 percent (this is also the rate at which two-thirds of small business profits are taxed).
- The lowest rate will rise from 10 to 15 percent.
- Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates.
- Higher taxes on marriage and family. The "marriage penalty" (narrower tax brackets for married couples) will return from the first dollar of income.
- The child tax credit will be cut in half from $1000 to $500 per child.
- The standard deduction will no longer be doubled for married couples relative to the single level.
- The dependent care and adoption tax credits will be cut.
- The Death Tax will return. For those dying on or after January 1, 2011, there is a 55 percent
top death tax rate on estates over $1 million. A person leaving behind two homes, a business, a retirement account, could easily pass along a death tax bill to their loved ones. Think of the farmers who don't make much money, but their land, which they purchased years ago with after-tax dollars, is now worth a lot of money. Their children will have to sell the farm, which may be their livelihood, just to pay the estate tax if they don't have the cash sitting around to pay the tax. Think about your own family's assets. Maybe your family owns real estate, or a business that doesn't make much money, but the building and equipment are worth $1 million. Upon their death, you can inherit the $1 million business tax free, but if they own a home, stock, cash worth $500K on top of the $1 million business, then you will owe the government $275,000 cash! That's 55% of the value of the assets over $1 million! Do you have that kind of cash sitting around waiting to pay the estate tax?
- The capital gains tax will rise from 15 percent this year to 20 percent in 2011. The dividends tax will rise from 15 percent this year to 39.6 percent in 2011. These rates will rise another 3.8 percent in 2013.
- The second wave (will be posted tomorrow)
- The third wave (will be posted day after tomorrow)
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