In just six months, the largest tax hikes in the history of America will
take effect. They will hit families and small businesses in three great
waves on January 1, 2011:
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 top 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. All the rates in between 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
- 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 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 return of the Death Tax. This year, there is no death tax. 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 and a
retirement account could easily pass along a death tax bill to their loved
Higher tax rates on savers and investors. 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.
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 can be used to pay for this type of
special needs education.
The HSA 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.
Third Wave: The Alternative Minimum Tax 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 can 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.
Now your insurance is INCOME on your W2s......
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 be astonished!
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 of some 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
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.
Protection of your wealth should be uppermost on your mind under these conditions. And there's no better place to put available cash than in Real Estate. And there's no better place to do that than in Tyler Texas and East Texas. Tyler Texas Real Estate/John C. Martin is here for you.
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