Skip to comments.Keeping Your Balance: 2012 and the end of the ‘Bush-era tax cuts’
Posted on 10/07/2012 7:56:40 PM PDT by Behind Liberal Lines
Without congressional action, at the end of 2012 the so-called Bush-Era tax cuts will expire, impacting nearly all taxpayers. Bush-Era tax cuts is the term generally used for the 2001 and 2003 Tax Reconciliation Acts. These changes were to last only 10 years, but a 2010 Tax Act extended the cuts until the end of 2012....
Lets take a look at the following couple. They are doing well, having combined wages of $125,000. They have 2 young children, $2,000 of capital gains, and $500 of dividend income. Under current rules, they would have a federal income tax of $15,810. However, if the tax cuts expire, their 2013 tax would rise to $20,736, an increase of $4,566. And of course, their payroll tax would also go up 2 percent for another $2,500, resulting in over $7,000 of additional taxes.
If the same couple had wages of $300,000, with $20,000 of capital gains and $4,000 of dividends, they could have a net tax increase of nearly $15,000. And you dont need to earn a lot to be impacted. A couple with no children earning about $30,000 each would see the total of their income and payroll taxes tax go up by $2,400.
Tax rates: In 2013, individual tax rates will effectively increase for all taxpayers, not just the rich. The top tax rate of 35 percent will increase to 39.6 percent, but the bottom 10 percent rate will disappear, replaced by a larger 15 percent tax bracket. While not part of the Bush-era tax cuts, the current 2 percent payroll tax cut is scheduled to expire at the end of this year, thereby raising taxes on all wage earners.
Capital gains and dividends: Currently, long term capital gains and dividends are subject to tax at a 15 percent rate. If you are in the 10 percent or 15 percent tax brackets, this rate is reduced to zero. This eliminates the tax on long term capital gains and dividends for married couples with income less than $70,700 (and half that if single).
Next year, capital gains rate reverts back to 20 percent (or 10 percent if you are in the 15 percent tax bracket). The news is even worse for those with dividends, as dividends will be taxed the same as other income, up to the maximum rate of 39.6 percent.
Alternative Minimum Tax: As the number of taxpayers subject to the AMT has continued to rise, Congress has continually enacted temporary fixes to moderate the impact by expanding the AMT exemption amounts. So far, this has not been fixed for 2012 and beyond. For 2011, the AMT exemption amount was $74,450 for married filing jointly taxpayers, and $48,450 for a single taxpayer. These will drop significantly to $45,000 and $33,750 respectively. This may cost taxpayers over $80 billion per year.
The marriage penalty: Under our tax structure, the tax on a two individuals, each with their own income is generally more if they are married than if they remain single. The current law attempted to minimize this difference by expanding married filing joint tax brackets and standard deductions, but beginning next year, a portion of this difference is eliminated.
Child tax & dependent care tax credits: Through 2012, there was a $1,000 tax credit for each dependent child under age 17. Beginning in 2013, the credit is cut in half to $500 per child. This credit is phased out as income goes over $110,000 ($55,000 if single).
In order to help people pay child care expenses so that they can work, the tax laws provide for a credit of up to 35 percent of the first $3,000 for a qualifying child or dependent, or twice that for two or more children. Beginning next year, the amounts are reduced to $2,400/4,800, and the top credit rate drops to 30 percent. For example, a lower income taxpayer with two qualifying children would get a 2012 credit of $2,100, but only $1,440 in 2013.
Education provisions: For 2013, you should plan on reductions, or outright elimination of many popular education-related deductions and credits.
Itemized deductions and personal exemption limitations: For higher income taxpayers, the 3 percent of excess adjusted gross income (over $173,650) reduction of itemized deduction would return beginning in 2013, as would the phase out of their personal exemptions.
Gift and estate tax changes: Potentially of even greater impact than the income tax changes is the return to pre-2001 estate and gift tax rules. The rates applicable to taxable gifts and estates will increase from the current 35 percent to 55 percent, while the exclusion from tax will decrease from just over $5 million to $1 million per person.
New taxes as part of health care reform: If you earn more than $200,000 (or $250,000 if married), there will be an additional 0.9 percent Medicare tax withheld from your wages. This tax also applies if you are self-employed.
In addition, there is a new Medicare tax of 3.8 percent on unearned income of high income taxpayers, effectively raising the maximum tax rate on investment income to 43.4 percent. The tax applies to net investment income from interest, dividends, rents, royalties and capital gains, and it kicks in at the same levels of the 0.9 percent tax above.
Business provisions expiring at the end of this year: It is not just individuals that will be impacted by the sun setting on various benefits. The generous bonus depreciation and expanded section 179 expensing rules will disappear. Also gone or going are the incentives for increasing research activities and investing in most energy savings initiatives.
While this covered many of the tax cuts we have enjoyed in recent years, the above list is not exclusive, and there are many other tax cuts that may be disappearing unless action is taken through new legislation.
But, but Barack promised!
My taxes would never go up...
I’m seriously thinking about switching my vote, and unfriending him.
These aren’t tax cuts, they are our nations tax RATE for over a decade. They were not changed when the Marxists had a super-majority.
Why Barack is running for 2nd Term???
Because jobs are hard to find in this economy and he does not wish to lose his only job.
And this time the GOP house/Senate handed him an ace on a silver platter to use against us: those delayed defense cuts, ~ $50B next year and on....which they (same GOP) NOW tell us will destroy the military.
So if Obama gets re-elected the Republicans in congress will tell us they must give up their demands for all the tax cuts extension, which they got in 2010. No way to tell which ones they will stand firm on.
By allowing the 2003 Bush tax cuts to retire, taxes will be increasing the bottom rate from 10% to 15% and the 20% bracket to 25%.
Raising the 10% bracket to 15% represents what percentage of increase? (Hint: The correct answer is NOT 5%)
To those moving from the 10% bracket to 15%, their taxes will be increased by 50%!!
Raising the 20% bracket to 25% represents what percentage of increase? (Hint: The correct answer, again, is NOT 5%)its s a full-blown 25% increase in taxes
Finally, raising the 35% bracket to 39% represents what percentage of increase: (Hint: The correct answer is NOT 4%)thats roughly an 11% increase in taxes.
“Why Barack is running for 2nd Term???”
In his third term, he’ll raise tax rates lots more.
Your exactly right. Romney needs to hammer Zero hard on this.
“your current tax rate is 10%.. Look at your check next time you get it. Look at the federal taxes taken out. Obama wants to raise that amount by 50%!!!! So if it’s 100 dollars this pay check, it will be 150 dollars next pay check. That is almost enough to buy a tank of gas for your car now that Obama has doubled the gas prices you pay”
Turn the 47% on him. Ya, they don’t technically pay any tax. but it is withheld from them. (and loaned to the government at 0% through out the year before credits)
Let's see, if you are in the first tax bracket, up to just $17,400 (married) your taxes will go up 50% (from 10% to 15%). Oh and not only that, but your Social Security Tax will go up 30% (from 4.2% to 6.2%) but remember there is no personal exemption on that.
For the next tax bracket, which I will call middle class, your Federal Tax rate will not go up; but you will still pay the $870 on your first $17,400(married). But since there is no exemption on Social Security taxes you will experience the 30% (4.2% to 6.2%) increase on all your income.
Oh and I won't mention the ObamaCare Premium notice I saw in my Open Enrollment "increases due to the Patient Protection and Affordable Health Care Act".
The thing to remember is that Obama knows he extended the Tax Cuts through 2012 and had reduced the Social Security taxes this year as well. So he KNOWS that he and the Democrats FAILED to extend them again before the November Election. He knows your premium would have to go up to cover more free stuff (like Sterilization Surgeries). He knows and is holding his breath.
So look into your Open Enrollment - Is your Premium going UP?
Please, everyone, remind Obama and the Democrats of this failure and your displeasure of having your taxes and healthcare premiums raised just before an election. Thank you.
If Obama wins I am all for just biting the bullet and telling the GOP to give him everything he wants
Let the economy of this great nation stagger and fall to its knees and let’s be done with it
If Obama cannot be defeated over the past 4 years then this nation obviously needs a much more illustrative lesson on the reality of the propaganda the left has been pitching for decades
Bring it, even though this will cost my family virtually everything we manage to set aside after meeting basics. Tighten belts and dig in. Galt moves onto Main Street.
And to the Hollywooders funding obama- paying to attend movies and concerts and buy DVDs etc produced by your overpriced directors, producers, actors and musicians is not a basic, so good luck wid dat income stream. Katy Perry SJP Tom Hanks and Matt Damon may need to find real work
As hard as it would be to do, I agree that this might be the only way to slaughter this beast of socialism.
Most likely though, the results would be blamed on Bush, much like the Depression was blamed on Hoover...8+ years later. Roosevelt was not held accountable for his policies.
Roosevelt was not blamed for his policies (and even the murderous pychopathic Stalin was given a free pass to pose alongside FDR and Churchill as their equal) because of a little distraction called WW2, a lesson probably not lost on the obamite politburo
“But, but Barack promised! My taxes would never go up... (”
That’s only for the 47% that never pay income taxes, you remaining subjects can go to hell!!!
God in Holy Heaven, what a nightmare scenario.
But, I do agree with you.
That is almost enough to buy a tank of gas for your car now that Obama has doubled the gas prices you pay”””
Don’t know wht kind of grocery cart car you are referring to, but one vehicle I own has a 22 gallon tank & the other has 40 gallon capacity.
$50 doesn’t take the needles past 1/2 way.
The smaller tank takes almost $100 now & the other one bumps thing up to about $180. To fill up when it is very low.
My car will go 450 miles on 60 bucks worth. I used that for example. Of course your mileage may very ;)
” So if Obama gets re-elected the Republicans in congress will tell us they must give up their demands for all the tax cuts extension, “
If Obama is re-elected, an additional 2-7000.00 in federal tax will be the least of our worries.
Forget the Republicans in congress. Most of them should be forced to spend the rest of their lives in Section 8 housing
with no pension.
Yes, my bi-weekly premiums are up, but not radically, about $15 every 2 weeks, off the top of my head. But, I am in the former Land of Sebelius, and as a state employee here we have suffered all manner of nonsense, from tobacco cessation incentives, to healthy habit incentives, offering discounts and $50 coupons ( I used mine to by ammo at Cabela’s one year). We’re on a tiered system so employees making more pay more; it doesn’t matter if I have one kid or seventeen (but I better not smoke) or weigh 600 lbs (but I better not smoke). I actually had to go to a doctor ( I think she was, anyway) this year for the first time in 20 years after I rotated my sacroiliac joint busting a rusty rear leaf spring hanger loose to save a couple dollar bolt.
Cost me like $500 to get it figured out and fixed, by an astute physical therapist, finally, after much nonsense.
Probably could have got it done for$100 at a chiropractor.
And I hadn’t had a claim in 20 years for myself.
Had scrips, x-rays, some gee-whiz BS-gram over a 2-week period and eventually 15 minutes with a bonecracker fixed it. I’ve had sciatica before (used to shoe horses) so am not a stranger to back/leg pain, but I could always fix it myself. I’m thinking it will be another 20 years before I go again...
Sorry for the diatribe but I’m not impressed with the trends in healthcare!