Tax changes

[Lzen]

Got this in an email. Can someone verify or disprove these things?



Tax Info




In just six months, on January 1, 2011, the largest tax hikes in the history of America will take effect.

They will hit families and small businesses in three great waves.

OnJanuary 1, 2011, here’s what happens... (read it to the end, so you see all three waves ...the worst is saved for last)

First Wave:

Expiration of 2001 and 2003 Tax Relief
In 2001 and 2003, the GOP Congress enacted several tax cuts for investors, small business owners, and families.

These will all expire on January 1, 2011.


Personal income tax rates will rise.
The topincome 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).
Thelowest rate will rise from 10 to 15 percent.
All the rates inbetween will also rise.
Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates.

The full list of marginal rate hikes is below:

• The 10% bracket rises to an expanded 15%
• The 25% bracket rises to 28%
• The 28% bracket rises to 31%
• The 33% bracket rises to 36%
• The 35% bracket rises to 39.6%

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 taxcredit will be cut in half from $1000 to $500 per child.


Thestandard deduction will no longer be doubled for married couples relative to the single level.


The dependent care and adoption tax creditswill be cut.


The return of the Death Tax.

This yearonly, there is no death tax. (It’s a quirk!)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?



Higher tax rates on savers and investors.

The capital gains tax will rise from 15 percent this year to 20 percent in2011.

The dividends tax will rise from 15 percent this year to 39.6percent in 2011.

These rates will rise another 3.8 percent in 2013.


Second Wave:

Obamacare


There are over twenty new or higher taxes in Obamacare. Several will first go into effect on January 1, 2011. They include:



The "Medicine Cabinet Tax"

Thanks to Obamacare, Americans will no longer be able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin).


The "Special Needs Kids Tax"

This provision of Obamacare imposes a cap on flexible spending accounts (FSAs) of $2500 (Currently, there is no federal government limit). There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children.

There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education.

Tuition rates at one leading school that teaches special needs children in Washington , D.C. ( National Child Research Center ) can easily exceed $14,000 per year.

Under tax rules, FSA dollars cannot be used to pay for this type of special needs education.


The HSA (Health Savings Account) Withdrawal Tax Hike.

This provision of Obamacare increases the additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.


CONTINUED.....

[Lzen]

Third Wave:

The Alternative Minimum Tax(AMT) and Employer Tax Hikes

When Americans prepare to file their tax returns in January of 2011, they'll be in for a nasty surprise-the AMT won't be held harmless, and many tax relief provisions will have expired.

The major items include:


The AMT will ensnare over 28 million families, up from 4 million last year.

According to the left-leaning Tax Policy Center, Congress' failure to index the AMT will lead to an explosion of AMT taxpaying families-rising from 4 million last year to 28.5 million. These families will have to calculate their tax burdens twice, and pay taxes at the higher level. The AMT was created in 1969 to ensnare a handful of taxpayers.


Small business expensing will be slashed and 50% expensing will disappear.

Small businesses can normally expense (rather than slowly-deduct, or "depreciate") equipment purchases up to $250,000.

This will be cut all the way down to $25,000. Larger businesses cancurrently expense half of their purchases of equipment.

In January of 2011, all of it will have to be "depreciated."


Taxes will be raised on all types of businesses.

There are literally scores of tax hikes on business that will take place. The biggest is the loss of the "research and experimentation tax credit," but there are many, many others. Combining high marginal tax rates with the loss of this tax relief will cost jobs.


Tax Benefits for Education and Teaching Reduced.

The deduction for tuition and fees will not be available.

Tax credits for education will be limited.

Teachers will no longer be able to deduct classroom expenses.

Coverdell Education Savings Accounts will be cut.

Employer-provided educational assistance is curtailed.

The student loan interest deduction will be disallowed for hundreds of thousands of families.


Charitable Contributions from IRAs no longer allowed.

Under current law, a retired person with an IRA can contribute up to $100,000 per year directly to a charity from their IRA.

This contribution also counts toward an annual "required minimum distribution." This ability will no longer be there.



PDF Version Read more: <http://www.atr.org/six-months-untilbr-largest-tax-hikes-a5171>; http://www.atr.org/six-months-untilbr-largest-tax-hikes-a5171#%23ixzz0sY8waPq1


And worse yet?


Now, your insurance will be INCOME on your W2's!

One of the surprises we'll find come next year, is what follows - - a little "surprise" that 99% of us had no idea was included in the "new and improved" healthcare legislation . . . the dupes, er, dopes, who backed this administration will beastonished!

Starting in 2011, (next year folks), your W-2 tax form sent by your employer will be increased to show the value of whatever health insurance you are given by the company. It does not matter if that's a private concern or governmental body ofsome sort.

If you're retired? So what... your gross will go up by the amount of insurance you get.

You will be required to pay taxes on a large sum of money that you have never seen. Take your tax form you just finished and see what $15,000 or $20,000 additional gross does to your tax debt. That's what you'll pay next year.

For many, it also puts you into a new higher bracket so it's even worse.



This is how the government is going to buy insurance for the15% that don't have insurance and it's only part of the tax increases.

Not believing this??? Here is a research of the summaries.....

On page 25 of 29: TITLE IX REVENUE PROVISIONS- SUBTITLE A: REVENUE OFFSET PROVISIONS-(sec. 9001,
as modified by sec. 10901) Sec.9002 "requires employers to include in the W-2 form of each employee the aggregate cost of applicable employer sponsored group health coverage that is excludable from the employees gross income."



- Joan Pryde is the senior tax editor for the Kiplinger letters.
- Go to Kiplingers and read about 13 tax changes that could affect you. Number 3 is what is above.



MY ADDED COMMENT!



LAST but far from least – effective January 1, 2013 – sell a property – PAY A FEDERAL TAX of 3.8% on gross sales price. Doesn’t matter if you make a profit on sale – it is on GROSS not net.

Worse part of this from my perspective is as a new tax it is an “opportunity” that the government can continue to exploit. No guarantee that the 3.8% won’t be increased in later years – remember social security was never suppose to exceed 1%. And of course there is the second shoe – since the Federal government is applying this tax, why not the State government too? As a potential source of large bucks – it may be too attractive for States to resist.

[FD]

Not sure about all of it, most of it falls under the planned sunset of the 2001 and 2003 tax cuts. Many of these provisions will almost surely be extended by congress, some wont.

[healthpellets]

afaik, the expiration of the bush tax cuts will alter the things you listed. but i'm not gonna go verify line by line. but generally, it looks accurate.

it's possible that some will be extended for two years, in theory because the Dems think they'll be back in power in 2012, so extending it for two years isn't a horrible deal for them.

what we have to watch out for is the "progressives" that believe a marginal tax rate of 75%-90% on the highest income earners is the way to fix this country. those are the people that want to kill this country.

those who advocate for the suffocating tax rates of post WWII are those who have no dreams and desires to be in the top 1%.

[bobbymitch]

The W-2 information is false. See - http://www.kiplinger.com/businessres...n-the-way.html

[vailpass]

Whatever the details the fact is that tax and spend is nails in obama's political coffin, nails I will happily help pound.

[alnorth]

Briefly:

based on what we're hearing from the congress, the income tax rates for the lowest couple brackets will probably stay where they are, and the estate tax exemption (hilariously called "the death tax" here) will probably be revised to about $3.5M or so.

Capital gains are definitely going to 20%, there is no appetite at all in congress to keep that at 15%. I'll research the rest later, but I can definitely say this:

That silly fairy tale at the end (basically everything after "and worse yet?") is total crapola. Wrong, False, Internet Urban Legend, etc. It has been flying around the internet for a few weeks now.

What is going on is that congress is basically nosey. They want to gather data on how much employers are spending on health insurance. For what reason? No idea, but it certainly is not going to be taxable, anyone who says it will be is either lying or ignorant. Probably going to be used for some study in a few years or whatever, but if anyone does call for taxing employer contributions to health insurance (aside from the big cadillac plans we already know about), there will be a holy war.

[alnorth]

Originally Posted by bobbymitch

The W-2 information is false. See - http://www.kiplinger.com/businessres...n-the-way.html

damn, you beat me.

[Omaha]

Originally Posted by Forward Dante

Not sure about all of it, most of it falls under the planned sunset of the 2001 and 2003 tax cuts. Many of these provisions will almost surely be extended by congress, some wont.

This

[Garcia Bronco]

Well if people can't use FSA money to purchase OTC drugs then this effectively kills the FSA.

[mnchiefsguy]

Originally Posted by Forward Dante

Not sure about all of it, most of it falls under the planned sunset of the 2001 and 2003 tax cuts. Many of these provisions will almost surely be extended by congress, some wont.

Congress might very well extend some of these, but until they do, I would count on them going away, thereby raising our taxes.

[tmax63]

Everyone keeps saying that some of the cuts will be extended but we are a 100 days from sunset and there hasn't been any action. I wouldn't bet on anything getting extended until they actually do it. Only hope is them doing it before this midterm election to try and buy votes. That makes it more like 50 days left.

[Garcia Bronco]

None of those cuts are getting extended. Absolutely zero. Anyone who thinks so is fooling themselves. But you don't have to take it. Tell your rep in November on in 2012 that they are fired.

[Chief Henry]

How many times did we hear Obama say he will not raise taxes on people who make under $250,000. So we have to take him on his word, right ?

[alnorth]

Originally Posted by tmax63

Everyone keeps saying that some of the cuts will be extended but we are a 100 days from sunset and there hasn't been any action. I wouldn't bet on anything getting extended until they actually do it. Only hope is them doing it before this midterm election to try and buy votes. That makes it more like 50 days left.

For some strange reason you think this has to be done by the end of this year. Not sure why, there is no rush on this. I wouldn't be surprised at all if the election season makes tax reform impossible before 2011, but taxes in the 2011 year are not due until April 2012. They will probably work on what they want to do for the 2011 year in the spring or summer of 2011 with the new congress.