"TAX HIKES COMING JAN. 1"
[note - all mistakes below are original to the text]
Sent: August 24, 2010 9:37 PM<
Subject: TAX HIKES COMING JAN. 1
In just six months, the largest tax hikes in the history of America will take effect.
ICA can help our clients find ways to shelter investment income from these increases.
Offer your clients a no obligation consultation with ICA to review their portfolio and prepare them for these increases.
Here is a brief overview of the income tax increases coming up:
They will hit families and small businesses in three great waves on January 1, 2011:
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 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 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 ones.
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.
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 not 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.
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 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##ixzz0sY8waPq1
Now your insurance is 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 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 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 employersto 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."
Thanks for forwarding this email. It would definitely be scary if Congress was planning on raising everybody's taxes at the end of the year, especially while the economy is struggling to recover. But luckily, that's not going to happen. Many of the claims in this email are misleading or outright lies.
You might remember that Sarah Palin recently said something similar about how Democrats wanted to have "the largest tax increase in U.S. history." Well, a website called PolitiFact.com that looks into claims from both Democrats and Republicans said that it's a blatant lie. In fact, they rated Palin's statement "Pants on Fire" - the worst rating somebody can get. You can read it here:http://www.politifact.com/truth-o-meter/article/2010/aug/04/distorting-democratic-plans-bush-tax-cuts/
The details of all of this are a little complicated, but it's important to understand how we got to the point where this is even a debate. Basically, Republicans passed huge tax cuts early in the Bush administration to try to stimulate the economy. At the time, the only way they could get enough votes in Congress to pass the tax cuts was to use a procedure called reconciliation (you might remember it from the health care debate) and write the law so that it would expire in 10 years. Read more about that here: http://www.time.com/time/magazine/article/0,9171,128937-1,00.html
So now the 10 years is up and Congress has to figure out what to do. I know it might seem obvious that they shouldn't let taxes go up at all, but here's the thing: the tax cuts cost A LOT of money (way more than Obama's stimulus) and they didn't lead to any significant economic growth. I know we all worry about the size of the federal deficit, but most people don't realize that the Bush tax cuts are one of the biggest causes of the deficit problem. Look: http://www.offthechartsblog.org/whose-deficit-is-it-anyway/
Still, most people can't afford to pay higher taxes right now and President Obama and Congress recognize that. That's why they're planning to pass a bill continuing the tax cuts for almost everybody, but letting them expire for the richest Americans. We're talking about households that make more than $250,000 per year, not middle class families. And the changes will only affect 1.9% of small business owners:
In fact, the only way the huge tax hikes in the email will occur is if Republicans do what they've been doing since Obama took office and try to block the bill when it comes up for a vote. Because if Congress doesn't pass anything at all, then everyone's taxes will go up - but that's not what anyone has in mind.
This is already getting pretty long, so I'm not going to get into every little detail in the email. I think the fact that the main point was so dishonest should tell you all you need to know. If there's a specific claim that's bothering you, I encourage you to do a little research of your own - this infographic summarizing President Obama's proposals for the expiring tax cuts is a good place to start:http://graphics8.nytimes.com/images/2010/07/25/us/politics/25tax-graphic/25tax-graphic-popup.jpg.
Please, be careful about forwarding emails like this in the future without getting all the facts. Otherwise, people might get all worked up for no reason.
Hope to talk to you soon!